Embezzlement prevention;

              ATLANTA
BALTIMORE
BIRMINGHAM HASKINS & SELLS PHILADELPHIA
PITTSBURGH
PORTLAND
BOSTON
CERTIFIED PUBLIC ACCOUNTANTS
PROVIDENCE
BUFFALO SAINT LOUIS
CHICAGO SALT LAKE CITY
CINCINNATI SAN DIEGO
CLEVELAND BULLETIN SAN FRANCISCO
DALLAS SEATTLE
DENVER TULSA
DETROIT WATERTOWN
KANSAS CITY LOS ANGELES BERLIN
MINNEAPOLIS HAVANA
NEWARK LONDON
NEW ORLEANS EXECUTIVE OFFICES PARIS
NEW YORK HASKINS & SELLS BUILDING
37 WEST 39TH ST., NEW YORK SHANGHAI
VOL. VII NEW YORK, DECEMBER, 1924 No. 12
Embezzlement Prevention
THE proverbial "ounce of prevention"
has its application to fiduciary lapses
as definitely and specifically as to any­thing
to which it may be applied. The
recovery of funds misappropriated is uni­formly
attended with time, annoyance,
and grief; often with worry and additional
expense.
One of the characteristics of defalcations
is that they usually have their beginnings
in small amounts. It is equally true that
most defalcations might have been mini­mized
in amount, if not prevented, by pre­cautions
of accounting system, properly
planned assignment of duties and routine,
internal control and check, and indepen­dent
audit. While the last mentioned is
frequently efficacious as a deterrent and
means of detection, the other precautions,
if exercised, frequently would eliminate
the necessity for independent audits con­sidered
solely from the viewpoint of dis­covering
irregularities.
The number of instances wherein em­ployers
would be guilty of contributory
negligence, were a defalcation to occur, is
almost beyond belief. Not only does the
employer fail to surround his funds with
natural safeguards, but at times he actually
puts temptation in the way of honest em­ployes
and encourages them to steal.
A certain concern which is by no means
an exception in this respect employs as
bookkeeper a man who also acts as cashier.
This individual, or someone under his
direction and control, prepares the sales
invoices, makes the charges to customers
accounts, enters the credits for returns and
allowances, keeps the cash book, handles
the cash, makes deposits, prepares and
enters disbursement checks, reconciles the
bank account, sends out statements to cus­tomers,
takes the trial balances from the
customers ledger and runs the general
ledger. To the dishonestly inclined
cashier, what could be easier?
The ways in which irregularities may be
perpetrated are legion. Probably all have
not been discovered yet. But there are
enough opportunities under the conditions
just described to satisfy the most nefarious
crook.
Nothing on the face of the earth except
an armed guard will prevent, as once
happened, an employe who is an out and
out thief from putting the money for a
Saturday morning pay-roll in his pocket
Friday evening and walking out with it,
never to return. This illustration is the
more ironical because in the case which
suggests it, the cashier, on his way out,
passed through the room in which public
accountants were working and bade them
"good-night," if not "good-by."
The number of employes, their lack of
attainment, or other limitations of one
kind or another, within an organization
may interfere with an ideal assignment or
arrangement of duties. Generally speak­ing,
however, it is ill-advised to allow the