1 cash larceny chapter 3. 2 pop quiz what is the difference between larceny and skimming?
TRANSCRIPT
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Cash Larceny
Chapter 3
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Pop Quiz
What is the difference between larceny and skimming?
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• Define cash larceny.• Understand how cash receipts schemes differ from
fraudulent disbursements.• Recognize the difference between cash larceny and
skimming.• Understand the relative frequency and cost of cash larceny
schemes as opposed to other forms of cash misappropriations.
• Identify weaknesses in internal controls as inducing factors to cash larceny schemes.
• Understand how cash larceny is committed at the point of sale.
Learning Objectives
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• Discuss measures that can be used to prevent and detect cash larceny at the point of sale.
• Understand and identify various methods used by fraudsters to conceal cash larceny of receivables.
• Understand schemes involving cash larceny from deposits including lapping and deposits in transit.
• Understand controls and procedures that can be used to prevent and detect cash larceny from bank deposits.
• Be familiar with proactive audit tests that can be used to detect cash larceny schemes.
Learning Objectives
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Larceny
Of Cash on Hand
Other
From theDeposit
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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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Frequency – Cash Misappropriations
23.9%
8.9%
71.1%
31.8%
28.2%
74.1%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Cash Larceny
Skimming
Fraud Disb
2002 2004
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Median Loss – Cash Misappropriations
$25,000$80,000
$70,000
$85,000
$100,000
$125,000
$0 $30,000 $60,000 $90,000 $120,000 $150,000
Cash Larceny
Skimming
Fraud Disb
2002 2004
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Dollar Loss Distribution – Cash Larceny Schemes
12.3%
12.9%
22.8%
1.4%
14.6%
6.8%
29.2%
1.9%
30.1%
8.7%
29.1%
14.6%
1.9%
13.6%
0% 5% 10% 15% 20% 25% 30% 35%
1,000,000 and up
500,000 - 999,999
100,000 - 499,999
50,000 - 99,999
10,000 - 49,999
1,000 - 9,999
1-999
All Cases Cash Larc
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Detection of Cash Larceny Schemes
0.9%
5.1%
6.2%
7.8%
23.6%
2.1%
11.7%
22.3%
22.3%
26.6%
21.3%
18.4%
10.9%
23.8%
4.3%
5.3%
2.1%
17.0%
0% 5% 10% 15% 20% 25% 30%
Law Enforcement
Anonymous Tip
Tip from Vendor
Tip from Customer
External Audit
Internal Control
By Accident
Tip from Employee
Internal Audit
All Cases Cash Larc
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Perpetrators of Cash Larceny Schemes
12.4%13.6%
34.0%
42.7%
67.8%
57.3%
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0%
Owner
Manager
Employee
All Cases Cash Larceny
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$900,000
$1,250,000
$140,000
$71,500
$62,000
$61,000
$- $250,000 $500,000 $750,000 $1,000,000 $1,250,000 $1,500,000
Owner
Manager
Employee
All Cases Cash Larceny
Median Loss by Position
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Size of Victim
13.3%8.0%
19.8%17.2%
21.1%
19.0%
45.8%56.0%
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%
10,000+
1,000-9,999
100-999
1-99
All Cases Cash Larceny
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Median Loss - Size of Victim
$105,500$39,000
$87,500$55,000
$78,500 $161,500
$98,000$100,000
$- $25,000 $50,000 $75,000 $100,000 $125,000 $150,000 $175,000
10,000+
1,000-9,999
100-999
1-99
All Cases Cash Larceny
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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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Larceny Schemes
• Theft from other registers– Using another cashier’s register or access code
• Death by a thousand cuts– Stealing in small amounts over an extended period of time
• Reversing transactions– Using false voids or refunds
– Causes the cash register tape to balance to the cash drawer
• Altering cash counts or cash register tapes• Destroying register tapes
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Preventing and Detecting Cash Larceny at the Point of Sale
• Enforce separation of duties• Independent checks over the receipting and recording of
incoming cash• Upon reconciliation of cash and register tape, cash should
go directly to the cashier’s office• Discrepancies should be checked especially if a pattern is
identified• Periodically run reports showing discounts, returns,
adjustments, and write-offs by employee, department, and location to identify unusual patterns
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Larceny of Receivables
• Theft occurs after the payment has been recorded
• Force balancing– Having total control of the accounting system can overcome the
problem of out-of-balance accounts
– Can make unsupported entries in the books to produce a fictitious balance between receipts and ledgers
• Reversing entries– Post the payment and then reverse the entry through “discounts”
• Destruction of records– Destroying the records can conceal the identity of the perpetrator
even though the fraud has been discovered
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Cash Larceny From The Deposit• Whoever takes the deposit to the bank has an opportunity
to steal a portion of it.
• Having controls such as matching the receipted deposit slip to the originally prepared slip does not always prevent theft
• Failure to reconcile the slips can foster an environment leading to theft
• Lack of security over the deposit before it goes to the bank can also lead to theft
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Cash Larceny From The Deposit
• Deposit lapping– Day one’s deposit is stolen and is replaced by
day two’s deposit . . . .
• Deposits in transit– Carrying the missing money as a deposit in
transit but never clears the bank statement
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Preventing and Detecting –Cash Larceny From The Deposit
• Separation of duties is the most important factor
• All incoming revenues should be delivered to a centralized department
• Compare the authenticated deposit slip with the company’s copy of the deposit slip, the remittance list, and the general ledger posting of the day’s receipts
• Two copies of the bank statement should be delivered to different persons in the organization
• Require that deposits be made at a night drop at the bank