Ch 2 - Skimming Flashcards
What is it called when theft of cash occurs before it enters the accounting system?
Skimming
What is skimming?
Theft of cash before it enters the accounting system
What percentage of all asset misappropriation theft involves skimming?
11%
What kind of fraud is skimming considered?
Off-Book Fraud - never recorded in the accounting system
Is skimming difficult to spot through normal accounting procedures?
Yes
How is skimming normally discovered?
By accident
Employee tips
Customer tips
What are the two types of skimming?
Sales
and
Receivables
What are the types of sales skimming?
- Unrecorded Sale
- Cash Register Manipulation
- After Hours Sales
- Off-Site Employees
- Poor Collection Procedures
- Understated Sales
- Check for currency substitutions
- Theft of Incoming Checks
What is an unrecorded sale?
Sales Skimming -
Sell goods/service
- Do NOT record sales in system/till
- No system-generated receipt
- Collect cash
- Keep for self
Can an unrecorded sale be detected by comparing the register tape to the cash in the drawer?
No, the total “Sales” in the system will match the total cash receipt because nothing was recorded.
What is Cash Register Manipulation?
Sales Skimming -
Ring “No Sale” in the register
Detect this by having sequentially numbered transactions
What are After Hours Sales?
Sales Skimming -
- Working nights/weekends
- Turning till off early
- Collecting cash themselves
What are Off-Site Employees?
Sales Skimming -
- Apartment managers
- Parking lot attendants
- Independent salespeople
Sales from these people are often unrecorded
What are Poor Collection Procedures?
Sales Skimming -
Recording cash receipts in total rather than by customer
What are understated sales?
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
What is a Check for currency substitutions?
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
What is theft of incoming checks?
Sales Skimming -
Take checks before they are entered into the Accounting System & Deposited into Bank
What are methods to prevent and detect sales skimming?
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
What are the types of receivables skimming?
- Lapping Schemes
- Write-Off Schemes
- Stolen Statements
- Forced Balancing
- Other
Which is more difficult to conceal - receivables skimming or sales skimming?
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
What is lapping?
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
How is lapping detected?
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
What is force balancing?
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
What are Stolen Statements?
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
What are other receivables skimming techniques?
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
What are preventative measures for receivables skimming?
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
