Atlanta Home Loan - Case Study
Question 5
Atlanta Home Loan – control failure
Date: October 29, 2013
To: Mr. Al Fiorini
Founder of Atlanta Home Loan (“AHL”)
From: PT
Consultant
Subject: Strategies and the Importance of Setting-up Controls for Your Business
Thank you for providing the background information of your company. Based on the information provided, there appears to be deficiencies in the control systems implemented within the operation. These control deficiencies were one of the main causes that allowed unintended individuals to gain unlawful control over Atlanta Home Loan. In order to prevent this from happening again, it is important to identify the main issues that caused the company to fall, generate alternatives to apply in the future, and evaluate these alternatives to see which controls would be most valuable to your future business.
Control System Analysis
Before attended the EMBA, your main system of control was action and result controls. Action controls were demonstrated in several control areas: direct monitoring of the credit inquiry of each loan application; close monitoring of the loan application/lead ratios and their trends to identify any irregularities; receiving funds directly from the proceeds at closing; receiving brokers’ checks overnight at AHL’s office or direct wiring of money to AHL’s general account. Result controls were demonstrated through AHL’s compensations to the loan officers based on who originated the deal.
Since the school started, in addition to the existing controls, you have set up remote monitoring system to keep track of employees’ daily activities as well as forwarded all corporate mails to California. These are also forms of action control. Provided that Wilbur generates revenues to the company, you compensate him through commissions. This is a result control.
Generally, there are four types of common controls a firm can utilize when setting up their internal control systems: results, action, and
Atlanta Home Loan – control failure
Date: October 29, 2013
To: Mr. Al Fiorini
Founder of Atlanta Home Loan (“AHL”)
From: PT
Consultant
Subject: Strategies and the Importance of Setting-up Controls for Your Business
Thank you for providing the background information of your company. Based on the information provided, there appears to be deficiencies in the control systems implemented within the operation. These control deficiencies were one of the main causes that allowed unintended individuals to gain unlawful control over Atlanta Home Loan. In order to prevent this from happening again, it is important to identify the main issues that caused the company to fall, generate alternatives to apply in the future, and evaluate these alternatives to see which controls would be most valuable to your future business.
Control System Analysis
Before attended the EMBA, your main system of control was action and result controls. Action controls were demonstrated in several control areas: direct monitoring of the credit inquiry of each loan application; close monitoring of the loan application/lead ratios and their trends to identify any irregularities; receiving funds directly from the proceeds at closing; receiving brokers’ checks overnight at AHL’s office or direct wiring of money to AHL’s general account. Result controls were demonstrated through AHL’s compensations to the loan officers based on who originated the deal.
Since the school started, in addition to the existing controls, you have set up remote monitoring system to keep track of employees’ daily activities as well as forwarded all corporate mails to California. These are also forms of action control. Provided that Wilbur generates revenues to the company, you compensate him through commissions. This is a result control.
Generally, there are four types of common controls a firm can utilize when setting up their internal control systems: results, action, and