Law office accounting procedures and internal controls;

              LAW OFFICE ACCOUNTING Bertram Frankenberger, Jr.
PROCEDURES AND Partner, New Haven Office
INTERNAL CONTROLS,
Presented before the Connecticut Bar Association, New Haven-October 1974
Kay Lyons once said: "Yesterday is a canceled check; tomorrow is a promissory note; today is ready cash—use it!" It is with such a philosophy that we approach today's accounting systems in general.
From a financial-accounting viewpoint, a law office is in most respects no different from any other business organization except that it relies totally upon professional services rendered for the production of its income. Conceptually, therefore, while a financial-accounting system is generally designed for accurate and current financial information, as well as the necessary checks and balances to minimize the possibility of fraud or embezzlement, it is imperative that we concentrate on accounting for service hours rendered and expenses incurred.
Achieving the ultimate objectives of an integrated system requires the full cooperation and understanding of the partners, staff and secretaries. This in itself is no insignificant accomplishment, considering the individual personal­ities
and practices of the various partners of any law firm, and particularly when a firm is considering a substantial change in its procedures.
The following discussion makes no attempt to distinguish between manual and computerized systems. The basic principles are applicable to either.
INTERNAL CONTROL
The system should provide for a separation of duties so that, for example, persons who handle receipts, whether cash or checks, are not responsible for controlling records of client receivables, the general ledger, bank reconcili­ations
or combinations thereof. Checks received should be endorsed and deposited promptly with cash received intact.
Invoices should be approved by the appropriate partner prior to disbursement, and persons responsible for preparing checks should not have access to receipts nor should they perform the bank reconciliation. The bank reconciliation itself should be reviewed by a partner responsible for administration. Credit memos canceling statements rendered should require approval of another partner.