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DISCUSSIONS > IIA GENERAL DISCUSSION AREA [ REFRESH ]
Thread Title: Banking resolutions not followed
Created On Sunday June 17, 2012 2:00 PM
  Banking resolutions not followed
  Banking resolutions not followed
  Banking resolutions not followed
  Banking resolutions not followed
  Banking resolutions not followed
  Banking resolutions not followed


outofbalance


Posts: 41
Joined: Dec 2008

Sunday June 17, 2012 2:00 PM

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I have noticed several cheques initiated by our various divisions that did not bear the proper authorized signatories and yet, our bank release the funds. None of the cheques were fraudulent though. It's just that the President, who is supposed to be one of the authorized signatories for payments over $500k, is unavailable or indisposed at times so the VP signs on his behalf. However, I noticed that not a single cheque over $500k was even signed by the President even though he was available!

I've worked in Canada since 1997 and I'm wondering, is this typical for banks to 'ignore' the banking resolutions? Sure none of the payments were fraudulent and if they were, would the bank be liable for releasing payments signed by a non-authorized signatory? But regardless, should this be brought to the attention of the bank? I have informed our division to obtain the proper authorized signatories but this is useless unless the bank checks the validity of the signatures. Maybe I'm missing something here?

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Baboo


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Tuesday June 19, 2012 6:41 AM

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Dear "outofbalance", before answering, I inquire whether you wana report this issue on behalf of audit department of your organization or as part of general employee of the organization.

If first one is the case, then you should find approved documents like financial authority policy or board resolution, standing instructions given to bank for operation of accounts etc. of your organization and report deviations of the approved documents, if any, to audit committee or CAE (which may be the case).

In second case, you should blow whistle to the bank's higher management.

-------------------------
Ejaz Rasul

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outofbalance


Posts: 41
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Wednesday June 27, 2012 1:36 PM

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Hi, Baboo.

Thank you for responding to my query. I apologize I didn't state my case very well.

Your first scenario is the the correct one. I am auditing the company I work for and would like to report my finding that the company bank resolutions are not being followed by the signatories. I do have copies of the banking resolutions approved by the board and communicated to our bank.

I am just wondering what 'significance' this resolution has if the bank themselves are honoring the cheques signed by signatories who signed above their limits. (None of the cheques were fraudulent though.) Does my recommendation simply end by stating that only authorized signatories within their respective limits sign cheques? Or do I go a step further and ask management to inform our bank that they are accepting cheques that are not in compliance with our banking resolutions?

Any comments would be appreciated.

Thanks.

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Yuri


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Friday July 06, 2012 8:31 AM

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I've never heard a bank is supposed to control corporate authority limits. I presumed the bank is responsible for signatures only. It's the company that makes sure the signature corresponds the amount. Banks don't care.

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hopingtopass


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Tuesday July 10, 2012 10:31 AM

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Technically, the bank is non-compliant with your agreement with them. However, most banks do not physically review checks.

In the event that a fraudulent check is paid by your bank, however, you would likely have recourse against the bank if they failed to comply with a legally binding agreement between the bank and your entity. Specifically, if the bank paid a check which was not properly signed, you could obtain restitution from bank.

It seems that banks have concluded that it is less expensive to pay claims for improper payouts, than to review every check that comes through the system.

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outofbalance


Posts: 41
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Sunday July 15, 2012 2:30 PM

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Thank you Yuri and hopingtopass.

Okay, I guess that's what I wanted to confirm. That the banks don't care as long as there are signatures and they are not liable as long as the cheques are not fraudulent. In any case, our banking resolutions have been amended so the signatories now match the resolutions.

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DISCUSSIONS > IIA GENERAL DISCUSSION AREA [ REFRESH ]
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