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Internal Financial Controls
Audit Reminder

You may recall a recent Alert, describing a CEBI Member's loss of $50,000 due to weak internal financial controls.  In that same Alert, a case of a $530,000 employee theft loss was also described.  Click here to review that Alert:
http://www.chiefexecutiveboards.com/alerts/alert007.htm

Only two months later, my morning paper reported yet another local employee theft, this time of 
$2.9 MILLION!!!   

How?   In this case, the same person was responsible for both writing checks and reconciling the payroll and operating checking accounts with the company's books.  She had been writing checks to herself since 1998.  A classic breakdown in financial controls.  

What to do?   

First, make absolutely sure that the person doing your bank account reconciliations is not the same person writing or signing checks.  Many business owners have their cancelled checks and bank statements sent to their homes, and at least make the pretense of having opened and reviewed the statement themselves before handing it to the person doing reconciliations.  How long would it take you to thumb through a month's cancelled checks, if $2.9 million was at stake?  

Again, this time of year is a great time to launch an "Internal Financial Controls Review/Audit".  Get it done before the year-end pressures set in.  It's probably worth some fees to your CPA or another service provider to come in, have a third-party look at how you do business and handle money, and give you the peace of mind of knowing that you're as well protected internally as you can be.   It might also be a good time to check with your insurance agent to see that your "employee theft" coverage is adequate.  These cases can add up to real money over time.  

As always, this is an Alert based on general information.  Your situation is unique, and you should rely on your own trusted advisors in making any decisions.  

Thanks,

Terry Weaver
CEO
Chief Executive Boards International
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