I'm being told there is a Sarbanes-Oxley issue with accounts receivable receiving checks and posting them. Do you know anything about this?


A: Based on how you described the situation, there could be a control weakness. It depends on whether your accounts receivable (AR) group handles the actual check and then deposits the funds, or just uses a copy of the check to post to the account. If the AR group handles the actual check and deposit, there is an internal control weakness.

Generally, you do not want AR personnel to handle cash because of the opportunity for fraud. By allowing them to post credits to the account, they can either pocket the money, or create a "lapping scheme" where funds received from one customer are applied to another customer who has older outstanding bills. A lapping scheme can occur when there is not a separation of duties with cash deposits and AR.

A better internal control is to provide the AR group with the check stub remittance advice showing the amount paid and the invoice number. Customers will often send back a copy of the invoice being paid as well. This should provide enough information to the AR person to post the cash receipt. If there is no remittance stub and the information is in the memo section on the face of the check, then a copy of the check is appropriate for the AR person to post the receipt.

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