Cash Receipt and Schemes Flashcards
A skimming scheme is easier to detect than a cash larceny scheme because it leaves an audit trail. T/F?
Cash receipts schemes are what we typically think of as the outright stealing of cash. The perpetrator does not rely on the submission of phony documents or the forging of signatures; he simply grabs the cash and takes it. The theft schemes fall into two categories: skimming and larceny schemes. Skimming is defined as the theft of off-book funds. Cash larceny schemes, however, involve the theft of money that has already appeared on a victim company’s books. Cash larceny schemes are easier to detect than skimming schemes because they leave an audit trail.
Types of sales scheme
An understated sales scheme is a type of skimming scheme in which a fraudster records a sale for less than it actually is and skims the difference.
Katie did not commit a register disbursement scheme because register disbursement schemes involve a fraudulent transaction that justifies the removal of cash from the register, such as a false return or a voided sale. Katie did not make any entry that would account for the missing money—she simply took money out of the register under Helen’s name so that she could avoid blame. Therefore, Katie committed a cash larceny scheme
The method of concealing a receivables skimming scheme whereby one customer account is credited for a payment that was made on another account is called which of the following?
Lapping customer payments is one of the most common methods of concealing skimming. It is a technique that is particularly useful to employees who skim receivables. Lapping is the crediting of one account through the abstraction of money from another account.
For example, suppose a company has three customers: A, B, and C. When A’s payment is received, the fraudster takes it for himself instead of posting it to A’s account. Customer A expects that his account will be credited with the payment he has made, but this payment has actually been stolen. When A’s next statement arrives, he will see that his check was not applied to his account and will complain. To avoid this, some action must be taken to make it appear that the payment was posted. When B’s check arrives, the fraudster takes this money and posts it to A’s account. Payments now appear to be up to date on A’s account, but B’s account is short. When C’s payment is received, the perpetrator applies it to B’s account.
Which of the following is NOT an effective control to protect against skimming schemes?
A. Reconciling the physical inventory count with the perpetual inventory records
B. Installing visible video cameras to monitor a store’s cash registers
C. Reconciling the sales records to the cash receipts
D. Restricting the accounts receivable clerk from preparing the bank deposit
Since skimming is an off-book fraud, routine account reconciliation is not likely to prevent or detect a skimming scheme. If such a scheme is taking place, reconciling the sales records to the amount of cash received will not indicate there is anything amiss; because the skimmed sale was never recorded, the books will remain in balance. Reconciling the physical inventory count with the perpetual inventory records, however, might reveal that there is shrinkage and therefore a skimming scheme.
As with most fraud schemes, internal control procedures are a key to the prevention of skimming schemes. For instance, employees who have access to the cash register should not also be responsible for delivering the bank deposit. The accounts receivable clerk should be restricted from preparing the bank deposit, accessing the accounts receivable journal, and having access to collections from customers.
An essential part of developing control procedures is management’s communication to employees. Controlling whether an employee will not record a sale, understate a sale, or steal incoming payments is extremely difficult. Some physical controls can be put in place to prevent employee skimming, such as video cameras monitoring employees who handle cash and implementing a lockbox.
Skimming schemes can involve the theft of cash sales or the theft of accounts receivable payments.
T/F?
Skimming is the removal of cash from a victim entity prior to its entry in an accounting system. Employees who skim from their companies steal sales OR accounts receivable payments before they are recorded in the company books.
