A Bad Cheque Signing Habit
(Vancouver, BC, Canada)
Joint Signatures Exist As An Internal Control
I work for a company that requires dual signatures on cheques. (I am not one of the signers.) One signer is on, site the other is not. Past practice has been to have the off site signer endorse several cheques which are kept under lock and key and the on site person signs when the cheques are issued.
The off site signer recently went to a seminar put on in the US (we are a Canadian Company) and was informed that this practice is not acceptable and will no longer pre-sign any cheques.
My question is ... Is this an acceptable business practice elsewhere?
I have worked for several different companies and this has been a practice that all have them have done.
Thank you for any input.
This practice occurs frequently in businesses as you noted ... however it is a really bad habit. It actually defeats the purpose of the internal control
of having two signatories on the account.
The off-site endorser was putting him/herself at risk. If it was felt that the internal control was not necessary then the bank account should have only one signer as that is what effectively was happening. By pre-signing, the off-site endorser was not doing their due diligence to ensure that the expenses had the proper authorizations and that they were legitimate. It also provides an environment where the on-site endorser could embezzle and/or abscond with funds.
A better practice would be to have scheduled cheque runs. When the off-site signer knows the schedule, s/he can make a point to stop in the office on those days, check the paperwork is in order and sign the checks.
Consideration could also be given, if your bank permits it, to setting a limit that once exceeds two signatories are required. Under the limit would permit only one signatory. It provides a measure of protection on large expenses, cash withdrawals, unexpected purchases or cheques written to self. However it may not be feasible if the internal control was put into place to meet criteria set by investors and/or lenders.
On a final note, as a bookkeeper, you NEVER want to be a signatory on any accounts where you are doing the books. This is to protect yourself. For example, in the U.S., if a bookkeeper has signing authority and payroll taxes are not paid and past due but other expenses are paid in the interim, the IRS can come after the bookkeeper for full restituition of the unpaid payroll taxes including all fines and penalties.