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A Look Under the Hood

Summer vacation is quickly approaching and it is time to get the family SUV into our mechanic to have a look under the hood to ensure there are no major issues that would impact our drive to Colorado. This got me to thinking that how often do business owners take the time to take a look under the hood of their business operations, specifically looking at the internal controls in place with their accounting operations?

Unfortunately in business today, the reality is that almost every business is hit by some form of fraud. Fraud is defined as any intentional act or omission designed to deceive others, resulting in the victim suffering a loss and/or the perpetrator achieving a gain. Too often I hear from a privately held business owner that they have implicit trust in their CFO/Controller/Bookkeeper, which makes the hair on my neck stand up! I have seen too many instances of this trust being usurped and the business owner feeling betrayed. My motto is “in God we trust, everyone else audit!”

Fraud prevention is all about education. The more businesses and employees know about fraud, the less likely they will become victims. Prevention is the most proactive fraud fighting measure which starts with strong internal controls. Therefore, in this first of a series of blogs I would like to pose a list of questions on the current level of internal controls in your business. Today we will start out in the area of cash receipts.

  • Are checks endorsed “for deposit only” immediately upon receipt?
  • Is all cash received, counted, and verified by two employees? If not, considering having the person receiving it make a photocopy of the actual cash for your records.
  • Does someone prepare a daily list of all cash and checks immediately upon receipt?
  • Are all cash and checks deposited intact on a timely basis? If possible, this should be someone other than the person preparing the deposit slip or recording the deposit in your accounting software.
  • Are duplicate deposit slips and copies of checks retained in the files?
  • Is the person who prepares the deposit different from the person recording the deposit?

By considering the above internal controls you can greatly reduce the opportunity for fraud with respect to cash receipts. Next time we will look internal controls regarding cash disbursements.

 

PKC Kuebler, APC is a full-service public accounting firm registered and licensed to practice as an accountancy corporation by the California Board of Accountancy . The information provided is intended for general tax and accounting needs. Articles are written for informational purposes only and should not be seen as any kind of advice. Content is accurate and true to the best of our knowledge, however, there may be omissions, errors or mistakes and it is advised you contact your CPA before taking any financial action. The opinions expressed in our articles do not reflect the opinions of any organizations in which we are affiliated with.

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PKC | Kuebler, APC

27244 Via Industria
Temecula, CA 92590
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