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@061 CHAP 9
┌───────────────────────────────────────────────┐
│ INTERNAL CONTROLS CHECKLIST │
└───────────────────────────────────────────────┘
"Conscience is the inner voice that warns us that
someone may be looking." -- H.L. Mencken
"Never trust a bookkeeper who comes to work in a
chauffeured Rolls-Royce."
-- Jenkins' First Law of Business Survival
Many small businesses are deficient when it comes to maintaining proper
internal accounting and financial controls. Such laxity is often to
blame when a bookkeeper goes on vacation to Brazil and doesn't bother
to return. While consulting a certified public accountant is highly
advisable in determining whether your business has adequate internal
controls, the following 10-point checklist will also be helpful in a
review of your procedures:
1. Do not let the same person handle your cash receipts and also
make bank deposits (unless this person is you).
2. A person who has the authority to sign checks should not also be
the person who writes them out.
3. Whoever signs checks, you or another person, should only sign
them when the bill that is being paid is presented at the time for
scrutiny, and the check number should be written on the bill at the
time, to avoid double payments or payments to a non-existent vendor
that is actually your employee's Swiss bank account. At the time you
sign a check, be sure you know what the bill is for.
4. Consider using some type of mechanical check imprinting equip-
ment for all checks that are written, as a further means of preventing
unauthorized payments. Such machines keep a record of the amount of
any checks written.
5. Use only pre-numbered checks and keep all of the canceled (or
voided) checks in your records. This will help make it readily
apparent if any additional checks are written without your knowledge.
6. Do a monthly bank reconciliation yourself, or have your outside
accountant do it, if you have one. NEVER let the person who writes
checks do the bank reconciliation. We personally know of a successful
firm that was nearly bankrupted because they allowed their in-house
bookkeeper to do both jobs, since she was the ex-wife of one of the
three partners in the firm and was considered to be totally trust-
worthy. That little error in judgment on their part wound up costing
them well over a half million dollars.
7. Deposit your daily cash receipts in the bank each day. Don't
let cash collections for one day get mingled with the next day's
collections.
8. Use a petty cash fund and voucher system for stamps, small
bills, and other small cash outlays. Do not use cash from the day's
receipts to pay bills! Put a voucher or bill in the petty cash box
each time money is taken out. When the fund is depleted, write a
check to bring it back up to the maximum amount (say $100), and record
all the vouchers at the time the check is cashed to replenish the fund.
9. Use prenumbered sets of sales checks, invoices, and receipts to
keep control of payments made and received. Duplicates will be kept
track of by the individuals making sales, etc., and the master copy
will enable you to make sure they account for all their transactions.
10. Maintain a master or control account for all of your accounts
receivable, and reconcile it each month to the subsidiary accounts. If
someone is stealing money from customer payments, it will be easier to
spot if the master and subsidiary accounts are reconciled regularly.