ch 2-3 Flashcards
skimming
Theft of cash prior to its entry into the accounting system
Sales Skimming
Skimming that involves the theft of sales receipts as opposed to payments on accounts receivable Sales skimming schemes leave the victim organization book in balance because neither the sales transaction nor the stolen funds are ever recorded
Off-book Fraud
A fraud that occurs outside the financial system and therefore has no direct audit trail. There are several kinds of off-book frauds that will be discussed in this book. Skimming is the most common off-book fraud
Understated Sales
A variation of a sales skimming scheme in which only a portion of the cash received in a sales transaction is stolen. this type of fraud is not off-book, because the transaction is posted to the victim organizations books but for a lower amount than the perpetrator collected from the customer.
Check- for-Currency Substitution
A skimming method whereby the fraudster steals an unrecorded check and substitutes it for recorded currency in the same amount
Receivable Skimming
Skimming that involves the theft of incoming payments on accounts receivable. This form of skimming is more difficult to hide than sales skimming, because the receivalbe are already recorded on the victim organizations books. in other words the incoming payments are expected by the victim organization. the key to a receivables skimming scheme is to conceal either that the payment was stolen or that the payment was due.
Lapping
A method of concealing the theft of cash designated for accounts receivable by crediting one account while abstracting money from a different account. this process must be continuously repeated to avoid detection.
Force Balancing
A method of concealing receivables skimming whereby the fraudster falsifies account totals to conceal the theft of funds. This is also sometimes known as “plugging”. Typically the fraudster will steal a customers account so that the account does not age past due. this causes an imbalance in the cash account.
Cash Larceny
The theft of an organizations cash after it has been recorded in the accounting system.
Cash receipts schemes
Frauds that target incoming sales or receivables. Typically the perpetrators in these schemes physically abscond with the victim organizations cash instead of relying on phony documents to justify the disbursement of the funds. Cash receipts frauds generally fall into two categories Skimming and Cash Larceny
Deposit Lapping
A method of concealing deposit theft that occurs when an employee steals part or all of the deposit from one day and then replaces it with receipts from subsequent days
Fraudulent Disbursements
Schemes in which an employee illegally or improperly causes the distribution of funds in a way that appears to be legitimate. Funds can be obtained by forging checks, submitting false invoices, or falsifying time records.
Reversing Transactions
A method used to conceal cash larceny. The perpetrator processes false transactions to void a sale to refund cash, which causes sales records to reconcile to the amount of cash on hand after the theft.
