What the bankers tell us;

              18 HASKINS & SELLS March
What the Bankers Tell Us
THERE are two features essential to
effective verification of cash: simul­taneity
and surprise. If either is absent,
the verification usually lacks effectiveness.
Simultaneous verification means count or
confirmation as of the same date, of all
pertinent cash funds, wherever located.
Such frequently is necessary in order to
prevent concealment of a shortage by
transfer of cash from a fund counted and
released by the auditor, to a fund as yet
uncounted.
It is not always essential that every fund
come within the scope of this form of veri­fication.
Certain funds may be omitted
temporarily if it is inconvenient to ver­ify
them at the time, provided they
are so small in amount or inaccessible
of location as to be of no practical use
to an embezzler in concealing thefts out
of other funds.
On the other hand, it is vital to the dis­covery
of a shortage that all sizeable funds
within reach of a custodian be verified
simultaneously. Nothing else, for ex­ample,
will prevent a cashier from with­holding
receipts from deposit in order to
conceal a shortage in cash in hand, if the
bank account is confirmed as of a date
prior to the count of cash in hand.
Surprise as related to verification of cash
means that the time selected for count
must be that least expected by the cus­todian
of cash funds. This is desirable in
order to forestall any attempt on the part
of the cashier to conceal a shortage, in
anticipation of an audit, by temporary
introduction of funds, particularly cur­rency,
obtained from sources either inside
or outside the business.
In some cases the necessity for surprise
may be small in comparison with other
factors. In others it may be of utmost im­portance—
particularly where suspicion ex­ists,
or where the cash system is designed
in such a manner that abstraction can be
perpetrated easily. In these latter in­stances
the element of surprise should
take precedence over all other considera­tions
in arranging the verification.
Cash counts in the past, however, fre­quently
have lacked the element of sur­prise.
They have been made with aston­ishing
regularity at month-ends. This has
happened in giving effect to the desire for
simultaneous verification. The supposi­tion
has prevailed that to attempt the
latter at any other date than at the end
of a month would meet with objections on
the part of bankers to rendering state­ments
and returning cancelled checks to
customers at promiscuous dates.
Dishonest employes have not been slow
in learning when to expect the auditors'
regular visits. They have been able in
a number of instances to anticipate such
visits, and for the time being to cover up
their tracks. The detection of irregulari­ties
therefore has been rendered more
difficult.
In efforts to remedy the situation, and
to base our contemplated recast in pro­cedure
more nearly on fact than on con­jecture,
the Technical Procedure Depart­ment
recently undertook to ascertain the
opinion of banks on the question of in­terim
balancing of depositors' accounts.
Approximately one hundred of the leading
banking institutions of the country were
canvassed as to their attitude in case ac­countants
generally should adopt the
practice of requesting that bank accounts
be balanced at odd dates. The banks
were asked specifically whether the adop­tion
of this procedure would call for such
additional work on their part as to be
annoying and burdensome to the extent
of being objectionable. If such were the
case, it was desired to ascertain whether
they would be willing to waive the objec­tion
and assist in the matter.
The replies were most encouraging. A
majority of the banks stated that requests
from auditors for statements at odd dates