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This post addresses internal control, fraud & related issues

When a business finds itself vulnerable to fraud, it is usually due to lack of oversight and regularly scheduled meetings that would permit the reconciliation of accounts. It is often helpful for a business to have external audits conducted by outside services. The use of signature cards during any business withdrawal will permit the proof banks need to verify authenticity of the signer.

Proof of banking transactions could also be verified through use of pre-numbered checks, deposit tickets, and bank statements.

Accounting transactions should be conducted by individuals who have no contact with operations or sales of the business, just as operations or sales should not handle accounting transactions. The access to company books and handling of cash should remain separate, thus minimizing the possibility of fraudulent activities. Records would also have a better chance of remaining accurate.

If the business owner conducted the financial transactions of the business through electronic transfers and online banking, they could also verify all other business transactions and any expected deposit activity handled by other business personnel.

Authorization from the account holder for bank notification concerning any irregular or unexpected transactions, could limit financial losses as soon as they begin to occur. The establishment of regular financial activity and scheduled bill payment could also be conducted by requiring multiple signatures on company checks.

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When a business finds itself vulnerable to fraud, it is usually due to lack of oversight and regularly scheduled meetings that would permit the reconciliation of accounts. It is often helpful for a business to have external audits conducted by outside services. The use of signature cards during any business withdrawal will permit the proof banks need to verify authenticity of the signer.

COMMENT ON ABOVE: The regularly scheduled meetings wouldn't be a major vulnerability to fraud. It is usually due to a lack of oversight and poor or weak internal controls, with no proper separation of duties, which gives an employee too much exclusive control in any one area. Add this to the outside ...

Solution Summary

The solution discusses internal control, fraud & related issues.

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