Case 7-1 The Greater Providence Deposit & Trust Embezzlement
1. How did Guisti commit the fraud, conceal it, and convert the fraudulent actions to personal gain?
2. Good internal controls require that the custody, recording, and authorization functions be separated. Explain which of those functions Guisti had and how the failure to segregate them facilitated the fraud.
3. Identify the preventive, detective, and corrective controls at GPD&T, and discuss whether they were effective.
4. Explain the pressures, opportunities, and rationalizations that were present in the Guisti fraud.
5. Discuss how Greater Providence Deposit & Trust might improve its control procedures over the disbursement of loan funds to minimize the risk of this type of fraud. In what way does this case indicate a lack of proper segregation of duties?
6. Discuss how Greater Providence might improve its loan review procedures at bank headquarters to minimize its fraud risk. Was it a good idea to rotate the assignments of loan review clerks? Why or why not?
7. Discuss whether Greater Providence’s auditors should have been able to detect this fraud.
8. Are there any indications that the internal environment at Greater Providence may have been deficient? If so, how could it have contributed to this embezzlement?