Chapter 4: Cash Receipts and Asset Misapprops Flashcards
(41 cards)
What are Skimmming Schemes - Cash?
Theft of cash from a victim prior to entry in accounting system
* Does not hit the books, no audit trail, can occur at any point
* -subdivided based on effect on Sales or Receivable
How does Check Skimming work?
- Fake company created with abbreviation to an existing comp with sec of state
- Perpetrator applies for federal tax ID #
- Bank account opened with these two prior reqs
- Checks arrive made out to OG comp, but perp skims ocassion check and deposits to fake comp
- Perp manages A/R associated w/ missing checks
Most Basic Skimming Scheme
Sales Skimming: Employee makes a sale of goods to customer, collect customer payment at POS, but makes no record
Skimming Sales
Explain Cash Register Manipulation
Act: Overt act of taking cash
Concealed: Employee ring “ no sale” or noncash transation, can also rig register to not print sale on register tapes
Skimming Sales
Explain After-Hours Sales
Act: Conduct sales during non business hours
Concealment: Create a cash shortage and inventory shortage –> inventory shortage an arise from many other reasons
Skimming Sales
Skimming by Off-Site Employees
Act: Employees work remote locations w/o supervision create costliest skimming schemes - Ex: property managers w/ ridiculous fees or parking lot rev
Concealment: Hard to supervise so easy to conceal
Sales Skimming
Role of Poor Collection Procedures
Act: Poor collection and recording procedures allow for the skimming of sales or receivable
Concealment: Aggregate sales instead of itemizing
Skimming of Sales
Check for Currency Substitutions
Act: Take unrecorded checks that perp has stolen and subsitute for receipted currency
Concealment: Common when access to incoming funds from an unusual source
Skimming Sales
Theft in the Mailroom for Incoming Checks
Act: Employees charged with opening daily mail take incoming checks instead of processing
Concealment: Only person in charge of receiving and recording, easy for employee to steal
Sales Skimming
What type of Sales Systems are used and the fraud risk associated ?
Manual: Easy to commit fraud
Computerized: Possible but harder to commit fraud
Mixed Use Systems: Some computerize & some manual - manual at risk for exploitation but computerized transactions with require adj to hide scheme
Sales Skimming
How can Sales Skimming be Prevented and/or Detected?
- Oversight presence when cash enters org - mngmt, cluster registers, video cameras
- Customer complaints & tips
- Cash register log in & log out times
- Activity logs for offsite personnel
- Reduce perceived opportunity to steal: 2 employees involved in opening org mail and recording pmts
Skimming A/R
How does the Skimming of Receivables happen?
Receivable payments not logged into the accounting system
- more difficult than skimming sales
AR Skimming Concealment
Explain how Lapping helps conceal skimming
Crediting one account through the abstrataction of $ from another account
**Continue until: **
1. Someone discovers the scheme
2. Restitution is made to the accounts
3. Some concealing entry made to adjust A/R balances
Some aspects of Ponzi scheme
Most common method
AR Skimming Concealment
Explain Force Balancing
Fraudster is in charge of collecting and posting payments - easy to hide - hard to catch
AR Skimming Concealment
Stolen Statements
Payment stolen and not posted, account receivable becomes delinquent
Concealment: Fraudsters intercept account statements and late notices, to keep customers unaware –> destroy or forge
AR Skimming Concealment
Explain Fradulent Write-Offs or Discounts
Write off customers accounts fraudulent, to hide skimming as A/R may be slipping - post entries to contra rev accounts - discounts and allowances
AR Skimming Concealment
Explain Debiting the Wrong Account
Debit existing or fake A/R to conceal skimmed cash –> add skimmed balances to large accounts or aging accounts abt to be written off
AR Skimming Concealment
Explain Destroying or Altering Transaction Records
Perpetrator destroys orgs accounting records to cover their tracks –> last ditch method
Ex: destroy cash register tapes, discarding transaction record
AR Skimming
How to Prevent and Detect Receivables Skimming?
- Implement strong internal controls
- Seperation of duties
- Rotate job duties
- Yearly Vacation
- Supervisor approval for witeoffs
- Trained audit staff
- Automated test
- Trend analysis of aging customer accounts
What is Cash Larceny and how does it differ from cash skimming?
Intentional taking away of employer cash without consent & against employer will
Difference: Money has already appeared on vicitims book and can occur anywhere employee’s have cash assess
**Occurs: ** Point of sale, from incoming receivables, from victim org’s bank deposit
Larceny at Point of Sale
Majority of larceny schemes, concealed w/ many methods
Larceny POS Concealment: Theft from Other Registers
Take money from another register to replace stolen cash in their register
Larceny POS Concealment: Death by a Thousand Cuts
Steal currency in very small amounts over extended period –> shortages credited to errors
Feasibility: Hard bc orgs trach shortages by employee
Larceny POS Concealment: Reversing Transactions
False voids or return - reconcile the amount of cash after the theft
