International Bank is experiencing bad publicity surrounding huge fraud losses in its foreign currency department. Accusations are being made in the press that the rogue trader blamed for the losses was operating outside the official guidelines with the tacit approval of senior management in the department because of the large profits made by this trader in previous years. The press claims that it was common knowledge in the foreign currency department that strict policies and procedures surrounding the size of trades and the processes for balancing out trades at the end of each day were not to be followed if the trader had verbally informed his supervisor of the trade. The press is also suggesting that the problems are not confined to the foreign currency department, and that poor attitudes are prevalent throughout all commercial departments at International Bank.
Required
Discuss the control environment at International Bank, assuming the press reports are correct. Which parts appear to be most deficient?