ATLANTA --- The division of the Georgia Secretary of State's Office responsible for licensing business and keeping up with corporate records has done such a poor job of tracking its own funds that state auditors say they can't guarantee that fraud or embezzlement hasn't taken place.

Secretary of State Karen Handel's office, which requested the audit shortly after Ms. Handel was sworn in earlier this year, says it agrees with the report's conclusions and is working to implement them.

"Based upon our examination of the Office of the Secretary of State's Corporations Division's internal controls, we believe the opportunity was great for someone within the Division to have perpetrated a fraud," auditors wrote.

The report identified about a dozen areas where the division needs to improve its processes to make sure that employees can't take advantage of the shortcomings. In what auditors cited as one of the most glaring weaknesses, auditors noted that one of the computer programs used by the division would allow employees to alter records without the program noting who made the change.

"This is a major flaw in the design of the system and could potentially result in the concealment of embezzled funds," the report said.

The audit lays out several other flaws, including incidents where cash payments to the division were left in a drawer that was locked only at night. Even then, three employees had keys, according to the report.

Ms. Handel's office has instituted a "no-cash" policy at the division to counter that opportunity for abuse, the report said.

And the audit said employees were not adequately trained to handle each other's jobs if needed; customer complaints were not tracked; and there were not enough layers of separation between the accepting of a payment and its deposit.

The audit was undertaken after Assistant Secretary of State Robert Simms asked for a report in late February, little more than a month after Ms. Handel was sworn in.

"One of our primary concerns is the volume of cash and checks the office takes in each day," Mr. Simms wrote. "Although there is a docketing system that captures these amounts on accounting reports, we do not believe there are sufficient internal controls in place to monitor and process the handling of cash as well as the checks."

A spokesman for Ms. Handel's office said the division is working on the auditors' suggestions.

"The secretary of state has already instituted many of the changes that were recommended," Matt Carrothers said.