Reference no: EM132176324

Question - The controller of a Philippine subsidiary confessed to embezzling more than $100,000 by taking an advantage of currency conversions. The Philippine controller maintained two accounts- one account in Philippine pesos to deposit funds collected locally and the other in US dollars so he could transfer funds from the Philippine account on a biweekly basis. The auditor became suspicious when he noticed that each transfer was rounded to the nearest thousand in pesos and dollars. For example, one day the statement showed a transfer of 885,000 pesos from the local currency and a transfer of exactly $20,000 in to the US dollar account. Further investigation revealed that the controller was actually withdrawing cash from the peso account, keeping some of the money, and depositing only enough pesos in the US currency account to show a transaction of exactly $20,000. Because the withdrawal and the deposit took place almost simultaneously, the US controller never suspected any wrongdoing.

Required: How did the Philippine controller successfully perpetrate his fraudulent activity? Analyse the case from the point of segregation of duties.