Internal Controls One of the largest losses in history from unauthorized securities trading involved a securities trader for the French bank, Societe Generale. The trader was able to circumvent...

Internal Controls

One of the largest losses in history from unauthorized securities trading involved a securities trader for the French bank, Societe Generale. The trader was able to circumvent internal controls and create more than $7 billion in trading losses in six months. The trader apparently escaped detection by using knowledge of the bank's internal control systems learned from a previous back-office monitoring job. Much of this monitoring involved the use of software to monitor trades. In addition, traders were usually kept to tight trading limits. Apparently, these controls failed in this case.

Answer the following True or False questions about Societe Generale's internal controls. These will assist you in determining the weaknesses.

1.The loss could have been avoided with a number of internal controls.

2.Required vacation time may have alerted managers to the hidden losses.

3.If traders have access to the monitoring software, then the separation of duties control is violated.

4.The trader was not under managerial oversight.