Brian Molony, a 29-year old assistant branch manager and leading officer of a large Toronto bank. He took $10.2 million worth in fraud (almost $26 million via in2013dollars). He fabricated loans to real and fictitious customers; gambling away the proceeds. Molony paid off earlier loans with subsequent loans to ensure that there were no discrepancies; known as a lapping scheme. Brian Molony had major fraud incentive and perfectly categorizes into the fraud triangle. The Fraud Triangle consists of: Incentive/Motives –something that encourages an individual to do an action: • Feed his gambling addiction, attempting to accumulated infinite amounts of money so he could keep playing • Extra financial gain, casino benefits (perks), recognition …show more content…
• Recognizing he is in a position of power, as his position gave him special insight into the company’s primary weaknesses. • Weak internal controls (ex. Segregating of duties), lax supervising and incompetent personnel. • Molony continued to get away with it – increasing the risk of further damages and makes it “easier” to take more money. The auditor had the responsibility of making inquiries of management through CAS 240: • Management’s assessment of risk that F/S may be materially misstated due to fraud. • Management’s process for identifying and responding to the risks of fraud in the entity. • Management’s communication, if any, to those charged with governance regarding its processes for identifying and responding to the risk of fraud and to any employees regarding its views on business practices and ethical behaviour. Not enough fraud protection was done. It is difficult for an external audit to accuse an organization of fraud – as you need to obtain enough evidence to get an opinion that is beyond reasonable doubt (90%-100% chance).With poor internal control; monitoring of controls, duty segregation and information systems that aren’t satisfactory, the risk of potential fraud is