Xerox 6180N Generic MICR Fundamentals Guide  - Page 143

depositing receipts to different employees.

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Security • Use a check that is protected. Many checks are printed on paper that has a chemical coating or has chemicals in its internal composition that react visually when solvents are applied or erasure is attempted. • Avoid using correctable typewriter ribbons. The same feature that let you easily remove typing mistakes enables a criminal to change the information on a check. • Enroll in a positive pay program. Many banks offer this type of program to commercial accounts. The account holder must give the bank a list of all checks issued each day by serial number and amount. The bank enters this information in a database, and the amount and serial number are compared to the list each time a check clears. If the information does not match, the bank notifies the account holder and refuses payment until authorization is received. Positive pay does not prevent payment of a correct amount to a different payee, or honoring of a duplicate check that arrives before the legitimate one. Embezzlement Embezzlement involves an employee writing checks for fictitious invoices, overpays invoices and then intercepts refunds, issues payroll checks to nonexistent employees, overpays employee accomplices, or underpays bills and pockets the difference. To protect against embezzlement, use the following guidelines. • Separate duties. Assign responsibility for issuing checks and depositing receipts to different employees. • Tighten procedures. Establish systems to positively associate payments with invoices. Using checks with duplicate copies can be helpful. • Reconcile statements promptly. Balance the accounts as soon as you receive the bank statement and canceled checks. Compare all issued checks to the current invoice file, and all deposits to the current receivables file. Ideally, this should be done by a third party that does not issue checks or deposit receipts. • Perform audits. Inspect the status of all accounts at frequent but irregular intervals. Generic MICR Fundamentals Guide 8-15

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Security
Generic MICR Fundamentals Guide
8-15
•
Use a check that is protected.
Many checks are printed on
paper that has a chemical coating or has chemicals in its
internal composition that react visually when solvents are
applied or erasure is attempted.
•
Avoid using correctable typewriter ribbons.
The same
feature that let you easily remove typing mistakes enables a
criminal to change the information on a check.
•
Enroll in a positive pay program.
Many banks offer this
type of program to commercial accounts. The account holder
must give the bank a list of all checks issued each day by
serial number and amount. The bank enters this information
in a database, and the amount and serial number are
compared to the list each time a check clears. If the
information does not match, the bank notifies the account
holder and refuses payment until authorization is received.
Positive pay does not prevent payment of a correct amount to
a different payee, or honoring of a duplicate check that
arrives before the legitimate one.
Embezzlement
Embezzlement involves an employee writing checks for fictitious
invoices, overpays invoices and then intercepts refunds, issues
payroll checks to nonexistent employees, overpays employee
accomplices, or underpays bills and pockets the difference. To
protect against embezzlement, use the following guidelines.
•
Separate duties.
Assign responsibility for issuing checks and
depositing receipts to different employees.
•
Tighten procedures.
Establish systems to positively
associate payments with invoices. Using checks with
duplicate copies can be helpful.
•
Reconcile statements promptly.
Balance the accounts as
soon as you receive the bank statement and canceled
checks. Compare all issued checks to the current invoice file,
and all deposits to the current receivables file. Ideally, this
should be done by a third party that does not issue checks or
deposit receipts.
•
Perform audits.
Inspect the status of all accounts at frequent
but irregular intervals.