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Equivocal Savings And Loans

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Case 5-34 - Equivocal Savings and Loan (ES&L)

I Ð'- Introduction

This case is about Equivocal Savings and Loan (ES&L), a large savings and loan association in the Northwestern United States. The purpose of this paper is to present the organizational structure regarding the company's assignment of responsibility for control as well as an organizational chart of its EDP department. The last section of this paper will present a memo showing a brief analysis of the aforesaid organizational charts.

III Ð'- Memo to the Audit Manager

July 4, 2007

To: The Audit Manager

Subject: ES & L Assignment of Responsibility for Control and Organizational Structure of the EDP department

We have carefully analyzed and studied the assignment of responsibility for control and the organizational structure of the EDP department of Equivocal Savings and Loan Association and have come up with or identified several strengths and weaknesses. The different commendable areas with regard to the assignment of responsibility for control include:

 The establishment of an Audit Committee in the board of directors which ensures that adequate controls are built into the system

 The presence of a control group in the accounting department which monitor the accuracy and completeness of data processing

 Reports from the internal auditors on controls built into the new systems which are submitted to and reviewed by the Audit Committee

 The active participation of the chairman of the board regarding audit and internal control matters through constant communication with his subordinates

 The presence of a Vice President for Finance who practically performs the function of a corporate financial manager

Included among the flaws in assigning responsibility for control are the following:

 Non-participation of senior corporate management in the overall approval of EDP systems design

 The performance



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