This internal controls checklist summarizes procedures that a bank should follow to properly manage accounts, transactions, and protect against fraud. Key points include: - Requiring proper identification for account openings and maintaining signature cards in secure storage. - Establishing approval limits for tellers, bookkeepers, and managers for withdrawals and other transactions. - Ensuring proper verification and endorsement of check deposits and following clearing periods. - Having collectors account for all receipts issued and turn over daily collections to mitigate robbery risks. - Reviewing loan release documents and amounts to prevent duplicate issuances or errors. - Maintaining custody over unissued receipts and checks and logging all requisitions for proper accounting

1. 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

2. - 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

3. 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.