Differences
Similarities
- Both companies failed because of poor internal management controls.
- Both companies had poured governance structure that oversaw the operations of the firm. The chairmen who controlled the management of the two companies were in people with high reputation2.
PFG
- Peregrine Financial Group offered an online trading platform that is fully staffed throughout the day and night.
- Increased customer base and customer assets gave it a good public image
- It had a large number of operating and independent brokers throughout the United States.
- The chairman was given good reputation in the futures community that backed up the company well for its services that it offered to the public.
- The company was rated as the best in offering customer service since they were able to respond to customer’s questions almost immediately.
PIHL
- They were able to sell both new and secondary issues to the investors
- The company had a very good reputation that made it become the best bank at the time.
- It had a good capital base and high ability to make markets in issuing securities that were also supported by research 3.
Risk management
- Help the other managers understand that it is their responsibility to set examples for the fight towards the organization’s mission and objectives
- People whom they appoint to various positions should be so appointed based on competence and not on a personal relation with the senior managers.
- Determine the most appropriate strategies of dealing with issues affecting the organization.
- I would develop contingency plans for handling liquidity risks
- Come up with a risk management structure that is geared towards identifying risks, monitoring and reporting them to various concerned personnel for corrections.
- I would attract the attention of other managers to generate short and long term risk management goals that are aimed at improving reporting lines and lines of authority.
Corporate governance
I would ensure that an appropriate structure for the management of liquidity risk and lines of authority and responsibility for managing risk exposures are well defined and that there are no overlapping of roles and duties.
Ensure continuous monitoring of the bank's performance and the overall risk of liquidity and ensuring that various reports are frequently reviewed to confirm their conformance to the organization’s expectations. Guidance for tolerance of certain risks such as liquidity risks are set and provided to all managers and in addition, the view adequacy of contingency plans
Internal control
Oversee the maintenance and implementation of management information system that identifies, monitors and controls the bank's operations.
Ensure that all managers and workers adhere to authority and responsibility so that internal processes may be managed efficiently.
Establish an effective internal control over the liquidity risk management processes and ensure that all staff is committed to the same. 4. Registration
The registration should be made rigorous so that such organizations are exposed to stringent rules of registration and that they pass through certain proficiency tests before they are allowed to accept public funds. It should involve investor education to help them make cognizant decisions when considering investments
Evaluate the roles and responsibilities of the two external auditors with respect to their failure to discover the risk exposure of their clients and detect frauds or financial problems in a timely manner? What could each of these external auditors have done differently in their audits?
PFG
The auditor was one person who operated the conduct of the audit of his home.
They had the opportunity to request for further information from either company that in this case did not happen.
The auditors ought to confirm the physical existence of the assets of the firm as is depicted in the financial statements and that the liabilities of the firm are truly owned by the firm PIHL
The external auditor has a responsibility of assessing whether the financial statements are properly stated and classified. In addition to if they are disclosed in conformance with the accounting principles and that the allocations of assets and liabilities are also a proportioned in conformance to the accounting standards. In the process of providing credibility to the investors, external auditors failed to evaluate the financial information well enough and that they did not recognize the bias in the report. As such, they also failed to double check the internal audit for any frauds that may have been committed. There was also no sufficient oversight of the audit operations. 6.
They failed to report on unresolved disagreements on between them and the managers.
The internal audit failed to detect that the signatures were fraudulently signed.
The internal audit failed to show that financial statements did not truly report the condition of the firms to the assets that the firm truly owned and the debts that she was liable for.
The internal audit had the opportunity if using the financial statements that were presented by the management to them. They had a the chance of questioning the accountant on issues that related to the figures that they received from the chairman. They also failed to report the material information concerning the institution and instead depended on approximations that they were provided with and that they reported to the public wrong information. They ought to interpret the information they were given to a reasonable degree.
Work cited
Lane, Christel.a "How Banks Construct and Manage Risk ." A Sociological Study of Small Firm Lending in Britain and Germany. September 2001 Print.
