Detect Internal Fraud Early with a Strong Audit Policy
Countless headlines demonstrate that dealers may not be monitoring daily financial activity within their stores. A recent headline announced that another Controller was charged with stealing more than $50,000 cash over a one-year period. The controller was arrested after the local District Attorney charged that cash was regularly removed from routine deposits and deposit slips were then falsified.
Best Practices
- Train and cross train all employees handling cash when hired. Continue to monitor jobs relating to cash receipting, depositing, posting and reconciling on an ongoing basis.
- Dealership employees must be trained to report all cash transactions over $10,000 utilizing IRS Form 8300. Form 8300 filing compliance is ongoing. All employees should be retrained regularly.
- Dealers must audit internal control policies relating to all cash transactions consistently. A highly trusted employee should have the same controls placed on them as all other employees.
- Review cash receipts for proper coding and closely review any changes made to payment types.
- Segregate accounting duties (payables, receivables and cash)
- Perform physical inventories using accounting sources as the control
- Have an outside source perform unannounced reconciliations of bank accounts and cash clearing accounts.Review cancelled checks for proper endorsements by payees.
- Take advantage of electronic banking. A dealer principal or an upper level manager should review bank activity daily for any unusual transactions.
- Limit and control the ability to wire money out of dealership’s bank accounts.
- Prepare accurate and timely bank reconciliations. An individual independent of dealership banking duties should prepare the bank reconciliation.
Although the above mentioned is not an all inclusive suggested best practice, demonstrating that dealership management has a robust audit policy goes a long way in deterring fraud and safeguarding dealership assets. Dealers should regularly perform self-audits; review bank statements, and perform random inventory counts during the year.
Ask Our Experts
To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
