Suspense Accounts – Approach with Caution

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When I was the Manager of Internal Audit at a bank, they had a separate computer application to manage commercial loans. This was because the commercial loan system was new and had not been integrated with the retail system. This situation had been in place for almost a year. But the tellers who processed these loan payments had to enter them into the retail banking system to properly account for the cash, and the retail system did not have any automated interface with the commercial loan system. So the “other side of the transaction” from the debit to cash was posted to a “suspense account.” Suspense accounts are notorious for problems, issues, fraud, errors, etc. They can be set up for any number of reasons. Most of the time, the reason is related to timing of the transaction in that only part of the transaction is completed first, and another part requires time or research or some other manner of processing.

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5 Comments to “Suspense Accounts – Approach with Caution”

  1. Marc says:

    Part accountant…part Elliot Ness…part Perry Mason. I would love doing your job just because I love “the hunt.”

  2. inizio says:

    Great article.

  3. Quyen Do says:

    Very good one! Your article helps me understand much better about what suspense account actually is 🙂

  4. JLC says:

    Why did the Vice President got kicked if there are no fraud involved? is it just because of gross negligence of not doing his responsibility i.e. to
    reconcile?

    • Benson says:

      Yes, the negligence of allowing it to happen when it was his responsibility to make sure it was under control was the primary reason. At the senior vice president level, you are expected to have this sort of thing under control. And when they discovered he was 5 or so months behind in his personal mortgage payments, he was then guilty of abusing his authority since that area was under his control. I don’t know if the fact that he was a pompous ass added any fuel to the fire or not.

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This entry was posted on April 6, 2012 and is filed under Bank Auditing. Written by: . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.