What is a bank signatory policy?

• A. A policy that designates who can sign checks and authorize payments, with limits and required approvals.
• B. A policy that eliminates the need for approvals.
• C. A policy that only applies to credit card transactions.
• D. A policy that requires signatures from all board members.

Answer: (A)

A bank signatory policy defines who has the authority to sign checks and approve payments for the organization, along with the limits and approvals required for those transactions. This is a key internal control that enforces segregation of duties: different people handle authorization and execution, and there are defined monetary thresholds that trigger additional reviews. By establishing who can sign, what kinds of payments require approval, and when dual signatures are needed, the policy helps prevent unauthorized disbursements, creates an auditable trail, and supports accurate cash management.

This policy typically covers more than just checks—it governs all bank disbursements such as wire transfers, ACH payments, and other electronic transactions. It may spell out dual signatures for larger amounts, temporary signatories, and procedures for updating signatory lists and revoking authority when someone leaves the organization.

It isn’t about eliminating approvals, it isn’t limited to credit card transactions, and it doesn’t require signatures from every board member. It designates a specific, accountable group of individuals who can authorize payments within defined limits.