It's time to make sure you have internal controls in place to reduce the opportunity that any of the following could happen in your business.
The check's in the ... drawer?
An employee received checks and only deposited them after they were matched to a customer’s account. When the employee left, the company discovered an entire drawer full of checks that had not been deposited because the employee had been unable to identify their source.
Problem
There was no record of checks received and no way to know that checks had been undeposited for long periods of time. At best, this failure to timely deposit checks results in a cash timing problem, but at its worst, it could lead to a permanent loss of company funds.
Solution
Have someone in your organization record every check at the time received, and then pass the list on to another person who should be responsible for making the deposit. Reconcile each day’s receipts with amounts deposited and account for any discrepancies. All checks will be accounted for and deposited in the bank in a timely fashion.
That's not my signature
An employee had control of the bank statements, which the owner never saw. When the employee left, a review of the bank statements showed forged signatures on checks.
Problem
Check copies were not locked up making them easily accessible by everyone in the organization. Once the employee had checks and forged signatures, she was able to cover her tracks by maintaining control of the bank statements.
Solution
Checks and other numbered documents should be locked up with access controlled by the owner. Bank statements should be sent to the owner’s home address for periodic review by the owner.
That address looks familiar
An employee who was in charge of Accounts Payable left the company. Her replacement discovered that the PO box used for one vendor matched several other vendors in the system. Further investigation showed that the AP clerk had created fictitious vendors and invoices that were paid and sent to her at a PO Box she established.
Problem
The employee was able to add new vendors and approve invoices. She controlled the AP module in the accounting system and could easily modify information in the vendor records.
Solution
Different people should maintain the vendor list and approve AP invoices for payment. The owner should also regularly review any additions to the vendor and customer lists, and compare addresses to existing accounts.
Something doesn't add up
A company had an account with a local gas station. At the end of each month they were given a stack of receipts with an adding machine tape reflecting the total amount due for the gas account. The company paid the gas station the total amount shown on the tape.
Problem
During an audit, it was discovered that the total on the tape did not match the total of the actual receipts. The tape total had been inflated and adjusted.
Solution
Always check the math on supporting documents - don't just rely on totals.
We can review your internal controls and existing procedures to make sure you are covered. You might also want to review our article and checklist here.
Contact us for more information.
