Alright... I'm working on an audit and would appreciate your thoughts!

We have a customer of the bank who has a loan payment posted to his account. So far, okay.

However, the payment was actually a check drawn on a business account totally unrelated to the customer as far as I know. This business is also a customer of the bank and has a loan with us, as well. The check is made payable to our bank. And... that's about all there is.

I suspect that there isn't anything particularly wrong with the transaction. Of course, I intend to inquire.

But... this is what I'm trying to contemplate: I know in the past, for example, some one may have made a payment on my behalf... and no one ever seems to have a problem with it so long as the payment gets made, right? But, from an audit standpoint, I'm looking at this transaction and wondering from the documents availabe, how am I supposed to know if we didn't inadvertantly post a payment to the wrong account, for example?

I suppose the easy answer is, well, you have the customer deposit the funds into their account and then they pay the bank or something to that effect. I just wonder if any of you have situations like this and how you may handle them.

Thank you!

Is there some sort of payment ticket or remittance slip that accompanies your payments? If so, you may want to retrieve that document to see if the check writer intended to pay on this account or a different account.

Yes, there is a payment ticket... written up by a bank employee.

Call the business customer and make sure this was the intent of the check.

Another issue involving loan payments made by third parties is the possiblility that the payment will constitute a preferential transfer if the third party files bankruptcy shortly after making the payment. A bankruptcy trustee could bring an action to recover the payment since the third party is not indebted to your bank. If at all possible, you should convince your borrower to have the third party make the payment to your borrower so that your borrower can make the payment to you instead of the third party.