Skip to content

ACCA Strategic Professional · Strategic Business Leader · Internal control and management reporting

Brevo Bank's board is considering how to reduce the risk of rogue trading. Currently, trading limits are set by the head of trading, positions are reconciled by the trading desk's own back-office team, and the internal audit review is annual. Which single change would most strengthen the control framework, given the board wants an effective control that is independent of those being controlled?

Moving limit monitoring and position reconciliation to an independent risk function is the strongest change. The current design lets the trading side police itself, so independence is missing. Independent, continuous oversight addresses that gap better than codes of conduct or slightly more frequent periodic audit reviews.

  1. ARequire traders to sign a revised code of conduct each year
  2. BMove the position reconciliation and limit monitoring to a risk function reporting independently of the head of tradingCorrect
  3. CIncrease the trading limits so fewer breaches are reported
  4. DAsk internal audit to review the position reconciliations twice a year instead of annually

Explanation

The core weakness is lack of independence: those who benefit from trading set limits and check positions. An independent risk function monitoring limits and reconciling positions addresses this directly and operates continuously. A code of conduct is a soft control, and more frequent internal audit is still periodic and after the event. Raising limits just hides breaches.

Did you get it right without looking?

One question tells you little. A timed set on Internal control and management reporting shows your real accuracy, how long you take and where you lose marks.

Practise Internal control and management reportingFree diagnostic mock

More Internal control and management reporting questions