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ACCT 410: Fraud Examination > Ch 2 - Skimming > Flashcards

Ch 2 - Skimming Flashcards

1
Q

What is it called when theft of cash occurs before it enters the accounting system?

A

Skimming

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2
Q

What is skimming?

A

Theft of cash before it enters the accounting system

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3
Q

What percentage of all asset misappropriation theft involves skimming?

A

11%

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4
Q

What kind of fraud is skimming considered?

A

Off-Book Fraud - never recorded in the accounting system

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5
Q

Is skimming difficult to spot through normal accounting procedures?

A

Yes

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6
Q

How is skimming normally discovered?

A

By accident

Employee tips

Customer tips

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7
Q

What are the two types of skimming?

A

Sales
and
Receivables

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8
Q

What are the types of sales skimming?

A
  1. Unrecorded Sale
  2. Cash Register Manipulation
  3. After Hours Sales
  4. Off-Site Employees
  5. Poor Collection Procedures
  6. Understated Sales
  7. Check for currency substitutions
  8. Theft of Incoming Checks
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9
Q

What is an unrecorded sale?

A

Sales Skimming -

Sell goods/service

  • Do NOT record sales in system/till
  • No system-generated receipt
  • Collect cash
  • Keep for self
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10
Q

Can an unrecorded sale be detected by comparing the register tape to the cash in the drawer?

A

No, the total “Sales” in the system will match the total cash receipt because nothing was recorded.

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11
Q

What is Cash Register Manipulation?

A

Sales Skimming -

Ring “No Sale” in the register

Detect this by having sequentially numbered transactions

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12
Q

What are After Hours Sales?

A

Sales Skimming -

  • Working nights/weekends
  • Turning till off early
  • Collecting cash themselves
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13
Q

What are Off-Site Employees?

A

Sales Skimming -

  • Apartment managers
  • Parking lot attendants
  • Independent salespeople

Sales from these people are often unrecorded

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14
Q

What are Poor Collection Procedures?

A

Sales Skimming -

Recording cash receipts in total rather than by customer

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15
Q

What are understated sales?

A

Sales Skimming -

Recorded in accounting system at a different amount than received from the customer (either unit price or quantities sold)

Manipulate customer receipt

Under-ring a sale but collect a larger amount from the customer

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16
Q

What is a Check for currency substitutions?

A

Sales Skimming -

  • Do not record receipts of checks
  • Take out the same amount in cash
  • The checks cover the amount of the cash

There is ALSO Credit Card for Currency subsitutions

17
Q

What is theft of incoming checks?

A

Sales Skimming -

Take checks before they are entered into the Accounting System & Deposited into Bank

18
Q

What are methods to prevent and detect sales skimming?

A

Management presence at all cash collection points

  • Routine checks
  • Video Cameras

Utilizing the customer
- “All customers receive receipts” policy

Register log-in/log-out policies
- Tracks who does what and when

Open work areas

Estimated cash collections and exception reporting

19
Q

What are the types of receivables skimming?

A
  • Lapping Schemes
  • Write-Off Schemes
  • Stolen Statements
  • Forced Balancing
  • Other
20
Q

Which is more difficult to conceal - receivables skimming or sales skimming?

A

Receivables skimming -

  • The original sale has been recorded
  • Company expects specific payments from specific customers
  • Customers will contact the company if they get another bill or statement showing their overdue balance
  • Customers can provide canceled checks as proof of cashed checks
21
Q

What is lapping?

A

Receivables skimming -

  • Overlapping duties
  • – Receiving payment checks
  • – Posting payments to individual A/R
  • – Making bank deposits
  • Skims payments one day and replaces the deficit with money from the next day, shorting the next day’s deposit
  • – Requires constant upkeep and regular cash flows
22
Q

How is lapping detected?

A

Receivables skimming -

  • Comparison of daily cash receipts and credits to A/R
  • Customers eventually complain if no changes are posted to A/R
  • Employee behaviors - Long hours of overtime and no days off
23
Q

What is force balancing?

A

Receivables skimming -

  • Record the cash receipt in the system
  • Do NOT deposit the stolen cash
  • Keep customer balances correct
  • Misstate the Cash Balance

Could happen as a result of poor segregation of duties.
ex. the person doing the bank reconciliations

24
Q

What are Stolen Statements?

A

Receivables skimming -

  • Overdue accounts usually receive overdue notices
  • Employee intercepts and alters the statement before sending it
  • Or they don’t send it at all
  • Can be done by changing the customer address in the billing system, perhaps to their own address
25
Q

What are other receivables skimming techniques?

A

Receivables skimming -

Fraudulent Write-offs

  • to bad debt, post discounts, etc.
  • to get the customer account balance to the correct amount

Debiting wrong customer account

  • Add stolen funds to customer accounts about to be written off
  • Sometimes fictitious accounts

Destroy or alter transaction records

26
Q

What are preventative measures for receivables skimming?

A

Segregate duties

  • Cash receipts and A/R posting
  • Cash receipts and bank deposits
  • etc.

Limit the ability to write off accounts (Managers)
- review writeoffs periodically

Proactively audit
- automated tests

ACCT 410: Fraud Examination (16 decks)

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