How Kendallville Bank Overcame Fraud and Strengthened Controls
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How Kendallville Bank Overcame Fraud and Strengthened Controls
- 1. Kendallville Bank Case Study Anastasiia Shevyreva Ali Alizada California State University Los Angeles
- 2. Outline • What happened at Kendallville Bank • The Fraud Triangle • Organizational Chart • CEO’S Course of Actions
- 3. CLO proposed changes to ALLL calculation Increase look-back period Combine CRE1 and CRE2
- 4. Effects on Net Income 1 Year Ago Current Year Q2 Q3 Q2 Q3 Net Income $2.09 $2.01 $2.12 $2.04 1 Year Ago Current Year Q2 Q3 Q2 Q3 PLLL $1.02 $0.98 $0.79 $0.76
- 5. The Fraud Triangle Pressure Incentives to commit fraud: 1) Maintain Reputation 2) Upcoming Acquisition Ability to commit fraud: 1) Unquestioning Trust of Upper Management 2) Weak Internal Controls Justification of Actions: 1) Just Combining Categories 2) Help in Acquisition
- 6. Organizational Chart Board of Directors Audit Committee CEO Head of Internal Audit CFO Consumer Business Head CLO Commercial Business Head Chief Operating Officer Senior VP External Reporting Head of Internal Audit Senior VP External Reporting
- 7. Renwood’s Course of Action • Amendment of filed financial statements • Investigate CLO Davis • CFO Kmetko • Internal control changes: o System of checks & balances o Audit Committee
- 8. Renwood’s Course of Action • External audit • Evaluate employee’s qualifications • Train the Head of Internal Audit in ALLL • Improve overall communication