Larry’s Laws of Larceny- Law 18: Two Signatures on a Check may be no Better Than one Posted on DecembBondBeebe
Larry Beebe, CPA
Many organizations have a requirement that any check drawn for more than a certain amount must be signed by two people. The assumption is that two signatures are better than one. If each person signing the checks takes their responsibility seriously, and examines the supporting documentation for each check, then two signatures are better than one. The fictitious scenario in the next paragraph shows how two signatures could be worse than one.
Rotten Rodney has had it with his job. He would love to steal big from the company and flee. He notices that the two executives signing checks often do not take their responsibility seriously. Rodney prepares a batch of checks for signature and waits for Fred, the first executive signer, to be on his way out the door for a weeks vacation before he says “but I have this huge batch of checks to be signed.” Fred knows that the other executive, Jim will look carefully at the supporting documentation, so he signs all the checks without looking at any supporting documentation. Rodney then waits until Jim is hurrying out the door and presents the batch of checks to him for signature. Jim thinks that Fred looked at all the supporting documentation so he signs without looking as well.
Rodney had buried a very large check payable to himself in the pile and he is off to Brazil with the proceeds. No one should even sign checks without carefully examining the supporting documentation.