I guarantee you that whoever said, "There’s a sucker born every minute,” was not talking about lawyers. Still, many small law firms get defrauded every year by their employees. In small companies, the focus is on the business and not on the accounting. It may seem impractical or unnecessary to segregate duties, but one person should not be entrusted in doing all of the bookkeeping. Small law firms should have an oversight system and enforce these policies. An accounting firm or CPA can help you create and implement effective internal control procedures for your firm. This will reduce errors and discourage fraud.
Here are 10 tips in segregating duties:
1. Do not have an employee sign your company checks, do not use signature stamps, and do not pre-sign checks.
2. Be the first to review mail. Open mail from banks and review credit card and bank statements for discrepancies and errors. Verify signature on checks.
3. Have bank statements sent electronically to your personal email account or to your home.
4. Deposit duties should be performed by two people. One makes copies and records in the deposit book, while the other records in the accounting program.
5. The person writing the checks should be different from the one mailing the checks. This prevents the checks from getting “lost” or changed after they are signed.
6. When signing checks make sure you compare corresponding invoice to the vendor name and amount on the check. Avoid issuing “urgent” checks without backup.
7. Print check register and look for missing checks, additional checks and completeness.
8. Review accounting reports for write-offs, write-downs, and bad debts.
9. Online bill pay should only be performed by owner and employees should not have bank passwords.
10. Someone other than the bookkeeper should do the bank reconciliations, or at least review them every month.
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