When in Doubt, Print It Out

Via CFO Magazine (T/Y Going Concern).

It was hard to steal cash receipts, says Pedneault, because they wouldn't be posted to the accounting records if a theft occurred. In the case of repeated thefts of a single customer's payments, the customer's balance would get noticeably bigger and older. Eventually, an executive following up on accounts receivable would see the gap and request customer payments. The customer would then offer proof that a payment was indeed made, and the fraud would be detected.

The presence of such basic controls enabled Pedneault recently to sniff out a "lapping scheme." Named for its method of posting overlapping payments, the accounting fraud typically involves an employee's theft of customer bill payments to a company. To cover up the theft, the employee enters the proceeds of the next incoming check into the accounting records as payment for the first bill. The employee then records the third incoming payment to cover up the second missing payment, and so on.

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