C2 Internal Controls Checklist

INTERNAL CONTROLS CHECKLIST PROCEDURES WHAT TO CHECK WHY - Savings Account Opening For Personal savings deposit : Acceptable ID's. Ideally only Voters' ID, Drivers' License, Credit CTC's are easily available to anybody anywhere. It Cards, SSS, GSIS, Pag-ibig and other Club Membership Cards is necessary for the bank to set a good standard of bearing client's signature for comparison with specimen signature identification requirement to authenticate a client's on the application forms & signature cards.CTC's not acceptable. signature and identity before approving the account. For joint accounts, the agreement must be filled up and signed. For Corporate Savings Deposit : Documents required e.g. SEC registration, Articles of Incorpora- Banks should know who are authorized to transact tion, Board Resolution for acct. opening with authorized signato- with the bank for and in behalf of the corporation. This ries and their specimen signatures. is very important to detect any fraudulent transactions Client must fill up all informations needed on all the forms for If you need to double check a client's identity in the account opening. future transactions, you always go back to the acct. opening forms and do some probing by asking his/her birthday, mother's maiden name & check if it tallies with the informations on the forms and cards. - Maintenance of signature cards Custody of Alphabetical & Numerical files of signature cards. Access to the signature cards must be limited to the ( Active Accounts ) These must be under the dual custody of the Cashier and the custodians to avoid possible alterations by personnel Bookkeeper or Teller ( if the bank's operation is computerized ). who plan to play around some slow moving accounts. - Maintenance of signature cards Custody of signature cards ( both alphabetical & Numerical files ) Inactive and dormant accounts with big balances are ( Inactive and dormant accts.) These must be placed separately in a locked cabinet under the potential sources of fraud. Hence signature cards of dual custody of the Manager and the Assistant Manager or the all inactive and dormant accounts must be placed in a Cashier. Any movement ( either deposit or withdrawal ) in any of well secured place to avoid access by anybody in the these accounts must be approved by the two custodians. bank. - Approvals limit for withdrawals Levels of approval must be guided by a manual or memo. Banks Approvals manual or memo will clearly identify the that are computerized must establish teller's limit for approval of levels of responsibility of the persons approving the withdrawals and banks that are not computerized must establish transactions. Ideally, one's approvals limit must be bookkeeper's limit for approval of withdrawals. Any amount of within what one can afford to pay in case a fraudulent withdrawal beyond their limit must be approved by the Supervisor transaction within their limit is being paid out. or the Manager. INTERNAL CONTROLS CHECKLIST

- Handling of check deposits All types of checks ( including Manager's Check, Demand Draft MC's, DD's and Pre-Audited gov't. checks may still and Pre-Audited Gov't. checks) must be subject for clearing. bounce for technical reasons ( e.g. alterations in the Only On-Us checks are not subject for clearing. amount, signature or date ). Hence, the need for the regular clearing period. Check deposits must be in the name of the account holder, be it Second endorsed check deposits are potential source personal or corporate account and must be properly endorsed by of fraud and the best way to mitigate the risk involved the authorized signatories. Acceptance of second endorsed is to discourage its negotiation as much as possible. checks for deposit must be discouraged. - Handling Withdrawals Verification process for signature and identification. If the bank's The bank has the primary responsibility to safeguard system is computerized, the teller verifies signature and approves their clients' money. An unauthorized withdrawal from withdrawals up to a certain limit. If not, then the bookkeeper who the client's account holds the bank liable to pay for posts the withdrawals to their ledgers, does the signature verifica- whatever amount was withdrawn fraudulently from his tion and approves the withdrawals up to a certain amount. Junior deposit account. External fraud can be controlled by Supervisors and Manager have to approve withdrawals above the checking the identity of the person transacting for Teller's or the Bookkeeper's limits. Sufficient identification should the withdrawal. Internal fraud can be controlled by be required for transactions of bigger amount. For withdrawals by requiring a Supervisor or Manager to approve bigger a representative, the authorization must be properly filled-up. amount of withdrawals. - Handling Daily Collections Start-of-Day and End-of-Day Procedures. Cashier gives pre- Collectors must account for all receipts issued for numbered receipts to collector. Ideally, a mid-day turn over of the day and must not keep blank receipts in their collections should be done to mitigate the risk of robbery while possession after office hours, especially on Fridays. on field with the money. Collector prepares a list of collections Collectors might be tempted to collect money after at the end of the day to be verified by the Cashier who gets back office hours or on weekends. all unissued receipts for the day. - Loan Releases Documents of all loans released must be stamped " PAID " plus Account officers could issue Cashier's check for the the date of release. A checklist of documents required vs. those release of a loan for the second time, especially for submitted must be attached to the client's folder. Rural Banks with very lose controls. Spouse and Co-Makers must sign documents in the bank. Borrowers could fake the signatures of the spouse and the Co-Maker if you allow them to bring the documents outside of the bank for signature. Accountant must review computations on amount of release, It would be very difficult to take back any overages charges and amortization prior to issuance of loan proceeds. in the net proceeds of the loan and more difficult to correct errors in the amount of amortization. INTERNAL CONTROLS CHECKLIST - Custody of Unissued Official These must be under the custody of a Junior Officer. All Cashier's Unless properly controlled, anybody could have Receipts and Cashier's Check Checks requisition must be logged prior to issuance. Likewise, access to blank Cashier's Checks and Official all Official Receipts requisition must be logged for proper Receipts. Fraudulent issuance thereof could easily

accounting. be done. - Waiver of Penalties and A clear guideline showing the levels of authority in granting these Bank could lose a lot of money if anybody could Charges. is very important. For computerized systems, a password must easily grant waiver of charges. Besides, this could be required before waiver transactions can be processed. Only be a potential source of fraud if employees will Senior Officers must be allowed to grant waivers. grant waivers for a fee or commission. - Handling of Overages and Check if an account for Overages & Shortages is maintained in Proper declaration of any shortages and overages is Shortages their books. Check further how overages are handled and how very basic discipline among bankers. Regardless shortages are settled. of amount, overages must be declared and taken up as Other Income at the end of the year. Shortages must also be settled on terms depending on the amount involved and the employee's affordability. - Approvals of other transactions Check if " Maker-Checker-Officer " procedure is being observed. This reflects the different degrees of responsibility This simply means that the person originating the transaction over the transaction, is different from the person checking and the person approving. The Checker must be of higher level than the maker, and the Approving Officer must ideally be a Manager, or an Assistant Manager at least.

C2 Internal Controls Checklist

by MABSIV on Jun 15, 2010

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C2 Internal Controls Checklist — Presentation Transcript