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How the deficiencies should have been avoided

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ABC Corp. was a sizable investment firm with over $1 billion in client assets. On January 1, 2019, Sam Waters was appointed CEO and Chairman of the Board. Under his leadership, the firm undertook a risky investment strategy, including huge cis 011 high-yield bonds for the firm's own investments. These are bonds that are rated less an investment grade.

As the amounts invested in these risky financial instruments increased, the then chief risk officer (CRO) made a series of presentations to the Board of Directors describing the risks related to the investment strategy. Waters and the Board of Directors concluded that the potential risks presented by the eRO were implausible, Shortly thereafter, the CRO was replaced with another CRO that appeared to be jess concerned about the risks involved in management's Investment strategy, In June of 2020, the firm announced that it had incurred a Significant amount of losses, Including the loss of hundreds of millions of investor funds that were supposed to be segregated. Subsequently, ABC Corp. collapsed and filed for bankruptcy

Question 1: Identify the weaknesses in internal control based on the facts above, and describe

Question 2: How these deficiencies should have been avoided.

Reference no: EM132962639

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