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��THE GRANITE MONTHLY.

��carried on from time to time, extend- ing over long periods. Now this would be impossible under any proper system of examination by the direc- tors, they having the advantage of knowing the character and habits of the officers and clerks. Many bank clerks are now tempted to fraud by the very negligence of those in charge.

But what is a proper examination, and how should it be conducted ? We will consider first the points to be cov- ered in an examination. Banks deal in but two things, actual money, or some form of written obligation that represents money. The credit side of a bank account shows how the money comes into the bank, and the opposite side gives the disposition of it, there- fore the debit side is operated upon by the thief, either by making no en- try of the receipts of the credit side, or by obtaining money in some way, and counting it on the debit side in some of the items, or by making a charge. This is only done while the examination is going on to bridge over the proper debits, and credits are made subsequently, and the resources drop back short again. There are many ways of producing this result, but these are the two great principles to be borne in mind.

Examples of the kind of examina- tion to be made are already established in many banks throughout the country. They are conducted by a committee of three or four directors every six months, but it would be better, probably, in most cases to have them at shorter intervals, and for the committee to choose the day without the knowledge of the employees. In the banks in which these committee examinations are required, they take the first of the month. No officer or clerk takes any part in the work of examination, ex- cept to answer the examiner's questions, if required, and the entire assets of the bank are placed in the hands of the committee. They commence in the morning so as to come out even, and be enabled to follow the trans- actions of the day, and conclude with

��the regular closing of the bank. They count the cash, and examine all the loans and securities of the bank. All the banks indebted to the bank send monthly statements of the balances due. The letters containing these statements, and all drafts, are turned over to the committee and are by them compared with the books. The amounts of the numerous notes held by other banks for collection and re- discount, the accounts of the corre- spondents, and the amounts due by the bank undergoing examination to other banks (as shown by their books), are in like manner certified by the other banks to the committee.

Combined with committee examina- tions, the requirement of daily reports from all branches of the bank, system- atically arranged, is an excellent safe- guard against collusion. The report of every clerk is proved by the report of another clerk, and mostly the proof of one is established by comparison with the items of several others, each distinct. The cashier is enabled, by this system, to check off the results of the business of each day in all the departments. When a report shows extraordinary results, an explanation should be required.

In small banks, where one person does all the work, the temptation is too great, and is certainly a criminal neglect on the part of the directors not to in- quire frequently into the affairs of the association.

By this method the committee and the stockholders are assured that the books give a true account of the actual condition of the bank, and peculations, such has have been carried on from year to year in many cases, are sure to be ovartaken before they reach any large amount. The only part of the ground not covered is the deposit ledgers, which must, perhaps, always prove a weak point as regards ex- aminations, so long as they are kept by the method that most banks keep them. Some banks, where there are two or more ledgers, change book- keepers every month, which is an

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