The Filing of Statements and Checks The check desk department delivers to the auditing depart ment, on the day following payment, the canceled checks debited to the account of the drawer. These checks are compared with the statements of accounts to verify the fact that the correct amount has been charged to the proper account. The items are then examined to be certain that they have been canceled and that they are drawn against this bank. They are then filed ac cording to date of payment, each account having its own com partment, until returned to the depositor with his statement or pass-book.
Upon receipt of stop-payment instructions the canceled checks are scrutinized to ascertain whether or not the item has been paid since the statement of account and canceled vouchers were last returned to the drawer. This information is furnished to the check desk department, whose duty it is to refuse payment on presentation in the event that the check was not paid at the time the stop-payment was received.
All depositors' statements rendered by the bank are made in duplicate; the original goes to the depositor and the duplicate to the auditor's files. Before filing, they are examined to determine whether they have been properly headed and the correct balance has been transferred from the previous statement; the canceled vouchers are also verified against the statement. These state ment files are referred to most frequently when investigations are being made in connection with the many inquiries received regarding completed transactions.
Bank Examinations At the beginning of this chapter it was noted that the work of the auditing department is of two kinds: (I) the daily routing of reconcilements, verifications. investigations, and filing; and (2) the periodical examination of whole departments and branches of the bank. The routine operations have been described more or less fully above.
The periodic examinations conducted by the auditor are but one set of examinations to which the banks are subject; several groups of examiners conduct examinations under different au thorities and for the somewhat different purposes enumerated below: i. The directors of the bank may appoint a committee from their own number, or may engage a professional auditing com pany, to audit and examine the whole bank, or a certain depart ment or departments, at regular or irregular periods. Their purpose is to fulfil their legal and moral responsibility to the stockholders and the creditors of knowing the conduct of the bank, to check up the work of the bank's officers and clerical force, and to improve the bank's accounting system.
2. The clearing houses, in an increasing number of the larger cities, have provided a special committee on examinations, which employs a regular corps of examiners to examine periodically the clearing house members. The special object of these examina
tions is to discover, rebuke, and reform bad banking practices which, if persisted in, may result in financial trouble not only for the subject bank but for the other members. Some of these practices may be legal and beyond the power of the Comp troller of the Currency, but yet dangerous. If pressure is brought to bear on the bank by its fellow-members, such bad practice or policy may be corrected before it matures in finan cial wreck.
3. The Comptroller of the Currency has under him an exten sive body of bank examiners, who examine national banks and report to him. The state bank commissioner in most states has a similar force to examine state institutions. These two examin ing agencies seek primarily to appraise the assets of the bank to determine its solvency and to discover violations of law and regulations and penalize the same. These two groups of ex aminers in some states co-operate closely, holding examinations in the same place at the same time and exchanging information. To remove an obstacle to the entrance of the state banks into the federal reserve system, the examination of state member banks was taken from the Comptroller of the Currency and put under the direction of the Federal Reserve Board or of the federal re serve bank by examiners selected or approved by the Federal Reserve Board. Whenever the directors of the federal reserve bank approve the examinations made by the state authorities, such examinations and reports may be accepted in lieu of examinations made by examiners selected or approved by the Federal Reserve Board. The board may order special examinations.
4. The examinations conducted by the auditing department are departmental examinations and branch-bank examinations. They are held at various times, usually one or only a few de partments being examined at a time. The examiners of the Comptroller and clearing house, however, examine simultane ously all departments. The time required to make the examina tion depends, of course, on the size of the bank and the examin ing force. In the largest banks some of the force may be kept busy two or three weeks. When the auditing department makes an examination of another department, it keeps in mind the fol lowing: Do the books of the department reflect the true condi tion of the work of the department, and are they of themselves correct? Arc the systems which have been devised and adopted for the handling of the work of the department being adhered to? From an analysis of discrepancies which may be found, can a better system be instituted? Unless there is some particular reason for examining certain of the departments at regular intervals, the examinations are made once or twice a year, at no set times.