Marie is the bookkeeper for the Buildco Construction Company. She makes out the payroll; prepares all of the payroll checks and reconciles the bank statements for the firm. She decides to increase her income by padding the payroll; accordingly, she makes out a check in the name of someone who does not exist. She then indorses the check with the payee's name and her name and cashes the check herself at First Bank where the company has its account. Under the fictitious payee rule, Buildco and not the bank will be liable for this check.

Question

Quizplus · Accepted Answer

The fictitious payee rule states that when a check is made payable to a fictitious person, whoever issued the check (in this case, Buildco Construction Company) will be responsible for any losses. In this scenario, Marie created a check in the name of a non-existent person and cashed it herself, meaning Buildco would be liable for any losses.

Marie Is the Bookkeeper for the Buildco Construction Company