Fraud is a quiet, insidious form of theft. It is not uncommon for a major fraud to cause a company to fail, and the criminal seldom makes restitution or goes to jail. In my years of experience as a CPA and certified internal auditor, I have seen a high rate of significant internal frauds. When I help my clients develop management and cost accounting systems, I advise them about implementing basic, cost-effective controls to help minimize, prevent, and detect fraud. Most frauds are committed by long-term, trusted, management-level employees. Review the following statements about banking and consider your areas of risk:

  • You may think the bank will only clear checks that show the name(s) of authorized signers. This is not true. Most checks are processed by the thousands in the bank's batch mode and signatures are not checked by anyone.
  • Some business owners believe banks check signatures on all checks exceeding $10,000. However, banks may only check signatures on a small percentage of checks written for large amounts (for example, more than $25,000), depending on the bank. You should always assume that the authorized signature "control" is nearly non-existent.
  • In some cases, banks require you to report a discrepancy within 14 to 30 days of receiving your statement. Check with your bank for specific notification times.
  • Adapted from Nation's Building News, the online weekly newspaper of NAHB. The author is Diane C.O. Gilson, CPA, CIA, Certified QuickBooks ProAdvisor and MasterBuilder ProAdvisor.