Many law firms have as part of their internal controls a double signature requirement for large checks drawn on client trust accounts. Because of our concern with proper disbursement of real estate transaction proceeds the following article from the Oregon Professional Liability Fund newsletter “In Brief” by Carol Wilson, PLF Practice Management Advisor and Richard W. Wingard, CPA, caught our eye and is reprinted here with permission.
Protect Yourself From Embezzlement: Check Those Cancelled Checks
Most banks no longer include a provision in their account agreements for requiring two signatures on a check. In fact, at least one bank has the following language in its agreement for new accounts:
If you (a) have specified that some or all checks must be signed by more than one person, (b) have specified that the authorized signers for checks in one category are different than those for another check category, or (c) utilize checks that require multiple signatures, you acknowledge that those restrictions are for your internal use only and do not bind us even if you have made us aware of them in a certificate of authority or otherwise.
If you currently have a bank agreement stating that two signatures are required on all checks or for amounts over a certain dollar figure, the bank may not check for two signatures before honoring the check. However, the bank may stand behind the existing agreement if a check without the proper two signatures is cashed.
Now that the bank may not be watching over your checks, it is even more important to have good law firm procedures that protect your money and your clients’ money. Here are some tips to help you avoid embezzlement: