Question

How can an institution prevent or minimize the cutting of erroneous checks? Large erroneous checks in aggregate or in a single instance can sink an institution - what procedures or methods can hedge against this devastating contingency? What is segregation of duties and how are they implemented? Who is responsible for implementing reasonable policies and procedures?

Answer 1

An institution can prevent or minimize the cutting of erroneous checks by takinng these following steps:

1. By having proper internal controls in place : These protect the organization and the polices and procedures must ensure that there is proper access controls to restrict access to financial records to authorized employees only , ensure proper segregation of duties , documentation of financial transactions in terms of information regarding their initiation etc
2. Be putting in an human resource policy of hiring employees who are worthy of being trusted including the past history of the employees , reasons for them leaving the previous jobs etc.
3. By having a positive work atmosphere: The organization must have a positive work environment that encourages and motivates theie employees to follow all the pre established polices and procedures completely so that they work in the best interest of the organization.
4. Educating and supervising the employees so that they understand how implementing and following the policies and procedures can prevent or minimize the occurrence of these erroneous cutting of checks.

1. Segregation of duties is a type of internal control in which there is a separation of duties and which is implemented in the organization to prevent errors and by ensuring that at least two people are responsible for the separate parts of any transaction or task.
2. This internal control measure is a technique of risk management for the organisations.
3. Segregation of duties involves breaking down tasks that under normal circumstances can be reasonably completed by one individual into multiple tasks.Example of segregation of duties would be :In case of payroll function payroll one employee is responsible for the accounting portion of the job and another employee is responsible for signing the checks

In an organization everybody from the management to the staff is responsible for the successful implementation of policies and procedures.. If required stff needs to be trained for an effective implementation of the polices and procedures.