Understanding Check Signing Procedures

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Questions and Answers

What does the MICR cartridge handle in the check printing process?

Secure printing of company logos

Standard printing of check details

Magnetically incoded character recognition line (correct)

Printing of remittance information

Why do companies typically schedule check runs at set times?

To ensure all checks are printed at once

To enable easier tracking of signature cards

To maximize the efficiency of the accounts payable department (correct)

To allow for daily budget approvals

Who typically has the authority to sign checks within a company?

Any employee in the bookkeeping department

The company’s external auditors

Random selection of staff members

Members of the treasury and accounting departments (correct)

What documentation is required by banks for each check signer?

A board resolution and a signature card Signup and view all the answers

What is a potential reason for a company to allow certain employees to sign checks only up to a specified dollar amount?

To mitigate risks of fraud and control spending Signup and view all the answers

What might necessitate that a check requires two signatures?

The dollar amount exceeding a certain threshold Signup and view all the answers

How does the frequency of check runs vary among companies?

It is influenced by company needs and payment strategies Signup and view all the answers

What should be done when paying from copies instead of original invoices?

Flag payments and seek high-level approval. Signup and view all the answers

What differentiates those who can sign a check from those who approve a payment?

Check signers do not typically approve payments Signup and view all the answers

How should payments be managed when statements are used?

Implement a policy for thorough research before payment. Signup and view all the answers

What is vital to maintain in the case of prepayments and deposits?

A log of all prepayments and a copy of contracts. Signup and view all the answers

Why should credits not be requested from vendors?

Credits can complicate future transactions. Signup and view all the answers

What is a common issue that leads to duplicate payments?

Repetitive payments without invoice numbers. Signup and view all the answers

What is the suggested method for assigning invoice numbers?

Utilizing a combination of vendor number and invoice date. Signup and view all the answers

How can accounts payable reduce the chances of using the same invoice number twice?

By implementing a systematic numbering scheme. Signup and view all the answers

What aspect of invoices is important for preventing duplicate payments?

A clear tracking system that references invoice numbers. Signup and view all the answers

What is a significant problem that companies face regarding payments?

Duplicate and erroneous payments Signup and view all the answers

What practice can help reduce the number of errors in payments?

Minimizing errors and paying on time Signup and view all the answers

What typically happens when a vendor calls about a missing payment?

An investigation is conducted across multiple departments. Signup and view all the answers

Why do many companies insist on paying only from original invoices?

To prevent duplicate payments. Signup and view all the answers

What is a common consequence of paying from copies of invoices?

Payment errors may occur. Signup and view all the answers

How do accounts payable departments typically handle missing original invoices?

They establish guidelines for payments made without originals. Signup and view all the answers

What problem is exacerbated when second invoices are approved for payment?

Duplicate payments to the vendor. Signup and view all the answers

How realistic is it to never pay from copies of invoices in practice?

It is entirely unrealistic due to lost papers. Signup and view all the answers

What is typically included in the report regarding check signer information?

Who can sign on which bank accounts Signup and view all the answers

Why should old reports of check signer information be collected and destroyed?

To prevent unauthorized access to sensitive information Signup and view all the answers

What role does a facsimile signature typically represent in large companies?

A high-level authorized signer's signature Signup and view all the answers

What is usually required when a check exceeds a specified dollar amount in most companies?

Two signatures Signup and view all the answers

How often is the information regarding check signer permissions typically updated?

Periodically Signup and view all the answers

What is a common limit that companies might set for checks requiring two signatures?

$10,000 Signup and view all the answers

Where should the reports on check signer information be stored?

In a safe, secure place Signup and view all the answers

What is a characteristic of manual signatures in the corporate world?

They are typically handwritten Signup and view all the answers

What is the best control method when dealing with invoice payments?

Implement policies to manage payments from copies Signup and view all the answers

What is a consequence of demanding original invoices from vendors?

Possibility of duplicate invoices being issued Signup and view all the answers

Why should payments from statements be avoided?

They increase the risk of duplicate payments Signup and view all the answers

When is it acceptable to pay an invoice from a copy?

When the invoice number is completely legible Signup and view all the answers

What is a recommended practice when handling a duplicate invoice request?

Review each request on a case-by-case basis Signup and view all the answers

How should a duplicate invoice be documented?

Marked as a copy or duplicate and filed immediately Signup and view all the answers

What should be required if an original invoice is lacking?

Approval from management before processing Signup and view all the answers

What is a potential issue with paying vendors strictly based on monthly statements?

It may result in unverified or duplicate payments Signup and view all the answers

What is typically required for checks over a certain dollar amount in most companies?

Two signatures Signup and view all the answers

Facsimile signatures are only used for checks under $10,000.

False Signup and view all the answers

What must be done with old reports of check signer information when new reports are distributed?

They should be collected and destroyed or asked to be destroyed. Signup and view all the answers

Most companies allow one of the two required signatures to be a _____ signature.

facsimile Signup and view all the answers

Match the following terms with their definitions:

Facsimile Signature = Signature made by a machine Manual Signature = Handwritten signature Double Signature = Two signatures required on checks over a certain amount Check Signer Report = Document detailing authorized signers and limits Signup and view all the answers

Why should reports on check signer information be stored securely?

To prevent fraud and unauthorized use Signup and view all the answers

What is a common practice when printing continuous format checks?

They are preprinted with bank account information. Signup and view all the answers

Handwritten signatures are commonly used in the corporate world.

True Signup and view all the answers

Smaller companies typically run checks every day.

False Signup and view all the answers

What should be maintained regarding the number of checks printed?

A log of the checks used. Signup and view all the answers

What is the dollar amount limit for checks that might not require a second signature in some companies?

$10,000 to $1,000,000 Signup and view all the answers

Checks printed on ____ printers can have security features for added protection.

laser Signup and view all the answers

Match the type of check with its description:

Continuous checks = Preprinted with bank information and multiple copies Laser checks = Printed on blank paper with security features Signup and view all the answers

What is the main reason for companies to keep access to check stock limited?

To prevent fraud and errors. Signup and view all the answers

Facsimile signatures are universally required for all checks.

False Signup and view all the answers

What must accounts payable account for when using continuous checks?

Voided and damaged checks. Signup and view all the answers

What is one reason vendors may not immediately return duplicate payments?

They allocate received cash to miscellaneous accounts Signup and view all the answers

All vendors will promptly return duplicate payments once they realize the mistake.

False Signup and view all the answers

What happens to cash received by vendors from duplicate payments?

It is put into a miscellaneous income account. Signup and view all the answers

To minimize risks of duplicate payments, companies should establish __________ for paying from copies.

realistic guidelines Signup and view all the answers

Match the following scenarios with their potential outcomes:

Duplicate payments = May take time to be returned by vendors Paying from copies = Increased risk of errors in payment processing Realistic guidelines = Minimized risk of duplicate payments Vendors holding cash = Able to earn interest on the funds Signup and view all the answers

What is the primary reason for the signer to check documentation before signing a check?

To verify that the check should be issued Signup and view all the answers

Checks are often stored in non-secure locations to speed up access for signers.

False Signup and view all the answers

Why can it be problematic if checks sit with the signer for several days?

It can lead to delays in payment and potential duplicate checks being issued. Signup and view all the answers

What is a common reason for companies to incur duplicate payments?

Failure to track invoices properly Signup and view all the answers

Checks should be reattached to the back-up documentation with a ______.

paperclip Signup and view all the answers

Companies are advised to pay only from original invoices to avoid duplicate payments.

True Signup and view all the answers

What should be avoided to prevent confusion in check signing?

Taking checks to the signer without immediate signing Signup and view all the answers

What should companies do when the original invoice is missing?

Establish guidelines for handling duplicate payments. Signup and view all the answers

Match the following responsibilities related to check processing:

Authorized Signer = Checks documentation before signing Accounts Payable = Manages vendor payments Internal Audit = Conducts audits of check stock Authorized Employee = Maintains security of check stock Signup and view all the answers

It is advisable for an authorized signer to also be responsible for securing check stock.

False Signup and view all the answers

Duplicate payments often occur when a vendor sends a ________ invoice after the original was lost.

copy Signup and view all the answers

What should be done immediately upon receipt of a new box of checks?

Check it for any signs of tampering. Signup and view all the answers

Match the following terms to their definitions:

Duplicate Payment = Paying for the same invoice twice Lost Invoice = An invoice that cannot be located Payment-Stretching Techniques = Delaying payments to manage cash flow Vendor Communication = Interaction with suppliers regarding payment status Signup and view all the answers

Which of the following strategies can help reduce errors in payments?

Employing best practices in accounting Signup and view all the answers

What might complicate the payment process even further after a copy of an invoice is paid?

The original invoice showing up later. Signup and view all the answers

Most accounts payable departments see lost invoices as a minor issue that can be easily resolved.

False Signup and view all the answers

Study Notes

Check Signing Controls

Assigning check signing tasks is often seen as an honor but can become a daunting responsibility in companies issuing numerous emergency checks.
A report detailing check signer authorization and required signatures for different dollar amounts is essential for internal control.
Distribution of signer information must be restricted and securely stored to prevent fraud opportunities.
Regular updates to this information necessitate collection and destruction of outdated reports or a directive to discard them.

Signature Types

Facsimile Signatures: Machine-generated signatures using a plate; common in mid-sized and large firms, often substitutes one signature in dual-signature scenarios.
Manual Signatures: Handwritten signatures, prevalent in the corporate environment.
Double Signatures: Generally mandated for checks exceeding a specified threshold, which varies by company, from as little as 1,000toashighas1,000 to as high as 1,000toashighas1 million.

Check Printing Process

Using blank check paper simplifies the storage and monitoring process, provided there is a sufficient supply on hand.
The check printing process incorporates vital information including MICR code, company logo, and amounts.
A special printer cartridge is required for MICR, which can also print facsimile signatures simultaneously.

Check Run Frequency

Regular check runs streamline accounts payable but can occur as infrequently as every two weeks, depending on company practices and cash management strategies.

Signer Authorization

Distinction must be made between individuals authorized to sign checks and those who approve payments.
Check signers typically belong to treasury or accounting staff and must have a signature card and board-approved authorization for each bank account.
Companies may limit signatory authority by dollar amount, requiring higher-level signers for larger transactions.

Handling Duplicate Payments

Proper procedures must be established when making payments from copies rather than original invoices, particularly for older invoices.
High-level approvals are essential for payments from copies, and thorough research should confirm no prior payment exists.
Maintaining a log of prepayments and contracts in the invoice file helps in tracking liabilities effectively.

Missing Invoice Numbers

Missing invoice numbers significantly contribute to duplicate payments, as they hinder tracking of paid vs. unpaid invoices.
A systematic numbering scheme must be implemented for invoices lacking numbers, avoiding duplication.

Payment Policy Considerations

Many companies establish strict policies against payments made without original invoices to prevent duplicates.
Practical policies should allow for payments from copies while also implementing controls to reduce duplication risks effectively.

Preventing Duplicate Payments

Confirm previous payments before processing new ones and require valid purchase orders for duplicate requests.
Maintain thorough documentation and legibly mark any duplicate invoices to avoid administrative confusion.
Avoid paying from statements where possible, as this practice can increase chances of duplicate payments with no invoice filed.

Conclusion

Companies must recognize the prevalence of duplicate payments and employ best practices to minimize errors while managing payment timelines.
Payment-stretching practices necessitate heightened attention to prevent further instances of duplication within the organization.

Check Signing and Controls

Signing checks can be seen as an honor, but it is often a complex responsibility, particularly with companies that issue numerous emergency checks.
A report detailing authorized check signers, their approval limits, and signature requirements is essential for proper controls and must be stored securely to prevent fraud.
Signature requirements can vary, with most companies requiring one or two signatures on checks over certain amounts, which can range widely based on company policies.

Types of Signatures

Facsimile Signatures
- Created using a machine that replicates an authorized signature, typically from a high-level signer such as a treasurer or controller.
- Often used in place of one signature when two are required.
Manual Signatures
- Handwritten signatures are standard in corporate environments.
Double Signatures
- Required for checks exceeding specific dollar amounts, which vary by company. Some set limits as low as 10,000,whileothersmayallowupto10,000, while others may allow up to 10,000,whileothersmayallowupto1 million.

Check Printing and Types

After an invoice is approved for payment, the check is printed, usually on a set schedule; large companies may do this daily, while smaller firms might do so a few times a week.
Two primary types of checks used:
- Continuous Checks: Preprinted with company details and include multiple copies per check; require rigorous tracking and secure storage.
- Laser Checks: Printed using standard laser printers on security feature-enforced blank paper.

Signing Process

Manual signature process can be labor-intensive, requiring checks to be attached to backup documentation and thorough verification before signing.
Delays in signing can lead to operational inefficiencies, such as vendors inquiring about payments or duplicate checks being issued if logs are not maintained.

Protecting Check Stock

Preprinted checks must be securely stored with access limited to authorized personnel; the signer should not manage check stock.
Regular audits, including surprise checks, help monitor compliance and prevent misuse of check stock.

Handling Duplicate Payments

Duplicate payments can occur due to lost invoices, requiring companies to establish best practices to minimize errors and ensure timely payments.
Often, when an original invoice is lost, a vendor may resend it, leading to confusion and potential duplicate payments if the original invoice is later found.

Guidelines for Payments Without Original Invoices

Many companies refuse to pay based on copies due to the risk of duplicate payments, recognizing that original invoices can sometimes get lost.
Establishing clear guidelines for when it is acceptable to pay from copies mitigates the risk of duplicate payments, ensuring financial prudence.

Vendor's Perspective on Duplicate Payments

Vendors may not prioritize returning duplicate payments immediately, leading to cash being retained longer than necessary.
Companies should be proactive in monitoring transactions and managing payments to minimize the impact of financial errors.

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Description

This quiz covers the complexities and challenges associated with check signing in companies, including the importance of proper controls over signer information. Participants will learn about the protocols that ensure secure handling of checks and the necessity for reports detailing authorized signers.