Fraud ABC Bank is one of the leading banks in the Sultanate of Oman with more than 100 branches across the country. Branch X of ABC Bank is situated in a prominent area and has a larger customer base exceeding monthly transactions of more than 1 million Omani Rials. Branch Structure The branch X is headed by one of the Senior Managers of ABC Bank, Mr. Mohammed, and around 25 employees including six supervisory level officers are working under him. Given below is the branch’s hierarchical structure
On 12.10. 2021 the branch’s customer service department received a complaint from one of its loyal customers Mr. Ahmed regarding a suspicious transaction on his current account statement. The issue Below is the copy of his complaint.
To
The Branch Manager,
ABC Bank,
Branch X
Date 12/10/2021
Dear Sir,
Suspicious transaction in my Current Account No 1-0116-88-12576
This is to bring to your notice that the above current account held by me at your branch has been debited with an amount of OMR 10,000 as a cheque payment (cheque number 4213673) on 10th October 2021. I have not issued any such cheque amounting to OMR 10,000. The cheque leaf number 4213673 has been used by me to pay an amount of OMR 500 and has not yet been presented for clearance.
Therefore, I kindly request you to investigate this matter immediately and rectify the error.
Thanks & Regards
Ahmed.
After receipt of the aforesaid complaint, the branch manager immediately checked the relevant record and found that the instant cheque debited to the account is with the forged signatory and does not match with the client’s signature held on records. The branch Manager immediately reported the matter to its Head office for necessary action and guidance. Head Office immediately swung into action and marked the said fraud to its internal audit department for a thorough investigation and to report within a week period. During the audit, the internal auditor found out that the cheque with the forged signatory was submitted as a non-crossed cash cheque and had been paid over the counter by one of the new banking assistants. The banking assistant has failed to scrutinize the detail of the withdrawer at the backside of the cheque leaf. Further, the officer in charge of the counter staff had gone for lunch during the time of withdrawal and the authorization password of the officer has been used by another banking assistant to approve the payment. The daily audit on the transaction vouchers is done by the assistant branch manager on the previous day morning. When the internal auditor was questioned about how he had not noticed the discrepancy the answer received from the assistant branch manager was shocking. The assistant branch manager informed me that he will only scrutinize the payment and deposit slips with the transaction report during the daily audit.

Requirement

Assume you are the internal auditor appointed to investigate this issue; you are required to prepare a report to the head of Internal Audit of ABC bank

Explain the reason for the fraud happening in branch X of ABC bank and how such fraud risk can be mitigated.

Answer rating: 100% (QA)

STEP 1 TABLE OF CONTENT 10 INTRODUCTION 20 REASON FOR FRAUD 21 Lack of Internal Control 22 Poor Supervision 23 Lack of Training 30 HOW TO MITIGATE FRAUD RISK 31 Implementing an Effective Internal Cont... View the full answer