CJ 125
UNIT TWO
SKIMMING AND LARCENY
REVIEW
THREE MAJOR CATEGORIES OF FRAUD
WHAT ARE THEY?
THE THREE GENERALCATEGORIES
1. MISAPPROPRIATION
2. CORRUPTION
3. FRAUDULENT STATEMENTS
MISAPPROPRIATION
• CAN BE BROKEN DOWN INTO TWO TYPES.
• WHAT ARE THEY?
TWO TYPES
• CASH
• NON-CASH
CASH FRAUDS
• THREE CATEGORIES.
• WHAT ARE THEY?
THREE TYPES OF CASH FRAUDS
1. SKIMMING
2. CASH LARCENY
3. FRAUDULENT DISBURSEMENT
FRAUD
MISAPPROPRIATION
CASH
CORRUPTION
FRAUDULENT STATEMENTS
NON-CASH
SKIMMING
CASH LARCENY
FRAUDULENT DISBURSEMENTS
SALES SKIMMING
WHAT IS IT?
WHAT ARE SOME EXAMPLES?
Skimming
• Theft of cash from a victim entity prior to its
entry in an accounting system
– “Off-book”
• No direct audit trail
• Its principal advantage is its difficulty to be
detected.
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Sales Skimming
• Employee makes a sale of goods or services,
collects the payment, and makes no record of
the transaction.
• Pockets the proceeds of the sale
• Without a record of the sale, there is no audit
trail.
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Sales Skimming
•
Cash register manipulation
– “No Sale” or other non-cash transaction is recorded.
– Cash registers are rigged so that sales are not recorded
on the register tapes.
– No receipt is issued.
• After hours sales
– Sales are conducted during non-business hours without
the knowledge of the owners.
• Skimming by off-site employees
– Independent salespeople
– Employees at remote locations – branches or satellite
offices away from the primary business site
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RECEIVABLES SKIMMING
• WHAT IS IT?
• WHAT ARE SOME EXAMPLES?
Receivables Skimming
• More difficult than skimming sales
– There is a record of the sale.
– Collection is expected.
• Customers are notified when payment is not
received and will most likely complain.
• Lapping
• Force balancing
• Stolen statements
• Fraudulent write-offs or discounts
• Debiting the wrong account
• Document destruction
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Receivables Skimming
• Lapping
– Crediting one customer’s account with payment received
from another customer
– Keeping track of payments becomes complicated.
– Second set of books are sometimes kept.
• Force balancing
– Posting to the customer’s account without depositing the
check creates an imbalance condition.
– Cash account is overstated so the amount skimmed must
be forced in order to balance the account.
• Stolen statements
– Employee steals or alters the account statement or
produces counterfeit statements.
– May change the customer’s address in order to intercept
the statement
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Receivables Skimming
• Fraudulent write-offs or discounts
– Write off the account as bad debt.
– Post entries to a contra revenue account – “discounts
and allowances.”
• Debiting the wrong account
– Debit an existing or fictitious A/R.
– Wait for the A/R to age and be written off.
• Destroying or altering records of the transaction
– Often a last ditch effort to conceal the fraud
– Makes it more difficult to prove the fraud
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PUT IT TO THE TEST
• WAS DR. LEE’S CRIME SALES OR RECEIVABLE
SKIMMING?
• WAS WINKLER’S CRIME SALES OR RECEIVABLE
SKIMMING?
• DESCRIBE ANOTHER SCENARIO OF EACH
CATEGORY?
YOU ARE THE EMPLOYER
• WHAT ARE SOME WAYS YOU CAN PREVENT
– SALES SKIMMING?
– RECEIVABLES SKIMMING?
CASH LARCENY
• WHAT IS IT?
• HOW DO WE LEGALLY DEFINE IT?
WHAT ARE THE CATEGORIES OF CASH LARCENY
SCHEMES?
• NAME THREE TYPES OR CATEGORIES.
Cash Larceny
• Intentional taking away of an employer’s cash
without the consent and against the will of the
employer
• Fraudulent disbursements
• Cash receipt schemes
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Cash Larceny Schemes
• Can occur under any circumstance where an
employee has access to cash
– At the point of sale
– From incoming receivables
– From the victim organization’s bank deposits
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Larceny At The Point of Sale
• It’s where the money is
• Most common point of access to ready cash
• Results in an imbalance between the register
tape and cash drawer
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PUT IT TO THE TEST
• WHAT IS AN EXAMPLE OF POINT OF SALE
LARCENY SCHEME?
• HOW IS IT COMMITTED?
• HOW ARE THEY CAUGHT?
• HOW COULD IT BE PREVENTED?
WHAT IS AN EXAMPLE OF INCOMING
RECEIVABLES SCHEME?
• HOW IS IT COMMITTED?
• HOW ARE THEY CAUGHT?
• HOW COULD IT BE PREVENTED?
WHAT IS AN EXAMPLE OF BANK
DEPOSIT SCHEME?
• HOW IS IT
COMMITTED?
• HOW ARE THEY
CAUGHT?
• HOW COULD IT BE
PREVENTED?
WHAT IS DEATH BY A THOUSAND CUTS?
• AND WHAT DOES THAT HAVE TO DO WITH
LARCENY??
• WHAT ARE SOME OTHER TRICKS?
YOU ARE THE EMPLOYER
• WHAT IS THE SINGLE BEST THING YOU CAN DO
TO PREVENT SKIMMING AND LARCENY IN
YOUR COMPANY??