In the United States, the management and auditors of publicly held companies must evaluate their
internal controls annually. The purpose of the evaluation is to look for any control deficiencies. Doing so will help avoid any penalties such as the $10.5 million that the SEC imposed on Citigroup Inc. as a result of its internal controls failures. See the article from SEC.gov, Citigroup to Pay More Than $10 Million for Books and Records Violations and Inadequate Controls.
You are an external auditor hired by Citigroup to perform an audit. You will be reporting to Citigroup’s audit committee.
Instructions
Write a 2–3 page report for the audit committee in which you:
Critique Citigroup’s internal controls and the purpose they serve.
Distinguish between operation and design control deficiency.
Determine the reasons that led Citigroup Inc. to pay $10.5 million in penalties.
Recommend techniques that will overcome the weaknesses of Citigroup’s internal controls; justify the recommendation.
Use three sources to support your writing. Choose sources that are credible, relevant, and appropriate.
Cite each source listed on your source page at least one time within your assignment.
Auditing
Case Study on Audit and Internal Control
Examine Citigroup’s internal control systems and the function they serve. The compliance with internal controls demonstrates workers’ awareness of as well as respect for organization’s values. They also play a part in setting the standards that employees must adhere to in terms of personal conduct and policy compliance. Citigroup. internal controls were put in place in order to safeguard the firm’s resources, reducing the risk of exposure, ensuring that its records and books as well as ensuring its smooth running and encouraging employees to comply with the applicable rules, laws and rules and regulations (Chalmers and al.,2018). However, the internal controls of Citigroup were not sufficient and did not get the desired results. In the end, the Office of the Controller of Currency (OCC) issued substantial penalties for problems that resulted due to the inadequate control processes. The company was unable to develop an effective risk management plan following OCC criticisms. It would have been able to regulate any doubtful data or business activity. The fraud at Citigroup was made possible due to the lack of internal controls and governance processes (Flitter 2020). Banamex gave its employees the responsibility of ensuring that its employees are properly trained.
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