Internal control question

The idea is to segregate duties. This isn't SOX-specific, either. The people who have custody of an asset should be different than those who record and authorize it. If one person holds any two of those three functions in general, it makes it MUCH easier to perpetrate fraud, because it circumvents an otherwise useful system.

Think of it like this: If I have access to the checks when they arrive (like, I'm receiving payments from customers), AND I can deposit them in the bank, what's to stop me from pocketing that payment? A lot less than if I'm only allowed to do ONE of those.

Granted, there may not always be enough "trusted" personnel to separate duties, in which case other security measures should be taken -- like, whoever reconciles bank statements should NOT also be the one depositing checks or recording transactions.

Does this make sense?

You were violating one of the basic principles from Auditing 101 by having the same person open the mail and make up the deposit.

An acceptable scheme would be as follows; two people should be involved, one who opens the mail and one who makes the deposit. Both people must be in the room when the mail is being opened. The person who opens the mail extracts any checks and makes a list which IS NOT given to the second person. The checks are then handed to the second person who writes up and makes the deposit. A manager or auditor then compares the list made out by the person who opened the mail to the deposit slip.

The theory is that if two people are involved there is a much lower risk of embezzlement since collusion would be required.

HTH Jerry

Ok.. it is contrary to the practice that happened in varied hotels, not related. I think the way it was viewed was, the person opening the mail has no knowledge of what checks are due to come in. They didn't do billing, they didn't take reservations, and they didn't book functions. The people that did those duties who were they ones expecting receipt of a check, never got to see the check.

The secretary could only record what came in the mail. The checks were dropped, sometimes preparing an actual deposit slip, sometimes just preparing a drop envelope for which was consolidated by the accounting office's general cashier. The general cashier has no knowledge what money was due to be dropped. They do not know how much any cashier recorded on the POS, have no part of billing, or booking.

Isn't that enough division of duties. Not meaning to argue. Just confused. As I mentioned, independent CPA firms audited our businesses each year. Large hotel chains developed the procedures for their companies, ostensibly to pass their internal audits. Now in the last

At one country club the receptionist opened the mail recording the checks on a listing, deriving the day's total. The checks were passed to the AP person to post the payments into AR. The AR payment screen doesn't show a balance, only the member's account number and name, followed by the amount entered for payment. The AR person would see payments posted to the accounts the next morning after update. The controller who reconciles bank accounts and assists with stuffing statements that the AR person prints had no part in that process.

Out of the 100 questions it was the only one I missed that I felt I had gotten correct. It could be that the procedure that various hotels have used, was a practice of segregation that dealt with existing staffing that was typical in most properties except for the largest of properties.

In my last hotel, the AR person was the general cashier. There was no GM secretary, so the sales secretary opened the mail, removing all checks, preparing the posting lists. She dropped the checks to the general cashier (also the AR clerk). Given the staffing, this was the best we could segregate. They don't allow budget to staff for segregation purposes.

Thanks every> TKnTexas wrote:

Another process not mentioned in this thread is date stamping the checks and logging them in. What if the person opening the mail takes too long to deposit the checks? That person could stamp the checks with a future date if he/she has a backlog of work.

This would cause more problems on the a/p side, especially with employee reimbursements. "Where's my check, I sent in my expense report 2 week's ago." Sorry, but I can send you a copy of the stamped page which proves I received it only a week ago.