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

MISAPPROPRIATION CASH SKIMMING CASH LARCENY FRAUDULENT DISBURSEMENTS NON-CASH CORRUPTION FRAUDULENT STATEMENTS FRAUD

SALES SKIMMING WHAT IS IT? WHAT ARE SOME EXAMPLES?

10 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.

11 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.

12 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

RECEIVABLES SKIMMING WHAT IS IT? WHAT ARE SOME EXAMPLES?

14 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

15 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

16 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

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.

21 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

22 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

23 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

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??