Wednesday, February 8, 2012

Fraud- Improper segregation of duties in handling cash

Misappropriation of cash is one of the common fraud reported in the corporate world.

In Nov 2010, it is reported that Malaysian unit sufferred a loss of RM 1.5million (approximately S$622k) due to the issuance of unauthorised cheque. It's not clear how this had occurred.

In general, one of the possibilities a cash fraud could occur is when certain individual forge the authorised signatories on the cheque. By forging the authorized signatories, the individual is able to direct the fund to his / her bank accounts. How can the internal controls of the Company helps to minimize the risk of cash fraud then?

Possible solutions are:
- to set dual authorized signatories requirement for the Company's cheque facilities
- existence of proper segregation of duties between cheque book-keeper, preparer of cheque, review of cheque amount, approver of cheque
- cash book review be performed by appropriate senior finance personnel
- review the cash movement by bank account on a monthly basis

The existence of above controls and/or procedures can help to mitigate the risk of cash fraud.

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