I. Theft of cash on hand
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- II. Theft of cash receipt
- 1. Skimming
- 1.1. Sales
- 1.2. Receivables
- 1.3. Refunds and Others
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ASSET MISAPPROPRIATION - CASH I. Theft of cash on hand- A scheme in which the perpetrator misappropriated cash kept on hand at the victim organization’s premises. Example: An employee (cashier) steals cash from a company’s vault or safe. II. Theft of cash receipt- Theft of cash receipts is any scheme in which the perpetrator misappropriated cash receipts. This can be separated into two types: Skimming and Cash Larceny. - The difference in the two types of fraud depends completely on when the cash is stolen. Cash larceny is the theft of money that has already appeared on a victim organization's books, while skimming is the theft of cash that has not yet been recorded in the accounting system. 1. Skimming- A scheme in which an incoming payment is stolen from an organization before it is recorded on the organization’s books and records. This is an “off-book scheme” because the receipt of the cash is never reported to the entity. - The prime advantage skimming scheme offers fraudsters is that it is very difficult to detect that the money has been stolen. - Skimming is one of the most common forms of occupational fraud. It can occur at any point where cash enters a business, so anyone who deals with the process of receiving cash could be in a position to skim money. 1.1. Sales- Skimming sales is the theft of money received from a sale of goods or services before it has been recorded. Example: Unrecorded: When a customer visits a store and buys a jacket, the cashier receives the cash payment but does not issue the invoice nor update the transaction onto the sales book of the accounting system. Understated: The customer has paid the amount of $1,000, but the accountant has deducted the amount from the sale to the amount of $900, this amount has been converted to $100. 1.2. Receivables- This type of fraud is more difficult to conceal than sales skimming. Incoming receivables payments are expected, so the victim organization is likely to notice if these payments are not received and logged into the accounting system. Example: Unconcealed An employee takes the $50 of a $500 receivable and does not care to conceal it. Write-off Schemes: An employee intercepts a $1,000 payment of AR, he would create a $1,000 “discount” on the account to compensate for the missing money. Another account that might be used in this type of concealment is the bad debts expense account. Lapping Schemes: a scheme whereby payments from a customer are stolen while other customers’ payments (or subsequent payments from the customer) are used to hide the scheme by offsetting this customer’s accounts receivable. For example, let’s assume that a person perpetrating a lapping scheme (e.g., A/R Clerk) receives customer payments and applies them to customer invoices. Customer A has three outstanding invoices: Invoice 111 (dated 2/1/20X4) = $1,200 Invoice 222 (dated 2/15/20X4) = $2,350 Invoice 333 (dated 3/5/20X4) = $895 On 4/1/20X3, Customer A sends a $1,200 payment to settle Invoice 111 and the A/R Clerk pockets (steals) the amount received. Invoice 111 remains unpaid at this point and the fraud perpetrator has stolen $1,200. Next, on 4/15/20X3, Customer A makes a second payment of $2,350 to settle Invoice 222. The A/R Clerk applies $1,200 of $2,350 received to Invoice 111 and applies the remainder of $1,150 (i.e., $2,350 - $1,200) to Invoice 222. At this point, Invoice 111 is paid in full and Invoice 222 has an outstanding balance of $1,200 (i.e., $2,350 - $1,150). Finally, on 4/30/20X3, Customer A makes a third payment of $895 to settle Invoice 333. The A/R Clerk applies $895 of the amount received to Invoice 222. Now the outstanding balance of Invoice 222 is $305 (i.e., $1,200 - $895) and Invoice 333 has a full outstanding balance of $895. 1.3. Refunds and OthersExample: An employee steal a refund due to the company for overpayment. This scheme typically relates to accounts payable or inventory. Surprisingly, many organizations don’t book overpayments or refunds due and the employee can steal it. 2. Cash Larceny:- A scheme in which an incoming payment is stolen from an organization after it has been recorded on the organization’s books and records. - Larceny often occurs at the cash register, cash collection point, or from deposits in transit. However, this form of theft is detectable if the company maintains accurate cash records, and it can be identified during cash reconciliations. Example: The employee waits for an opportunity when there is less activity at the cash register to open the till and steal some cash. If employees are unable to balance the cash recorded on the cash register and the cash received, they may resort to destroying register logs to avoid being implicated in a crime. Destroying the logs would prevent the employer or auditors from reviewing the logs to identify any discrepancies with the cash received. Download 17.65 Kb. Share with your friends:
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