FUNDAMENTALS OF

FORENSIC AUDITING
AND ACCOUNTING

CASH LARCENY

LEARNING OBJECTIVES

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

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

Larceny
Of Cash on
Hand
From the
Deposit
Other

WHAT IS CASH LARCENY?

Definition:
Intentional taking
Of employers cash
Without employers consent
Cash includes currency and
checks

DEFINITION (source acfe.org)

Cash larceny:
A scheme in which an incoming payment
is stolen from an organization after it has
been recorded on the organizations
books and records (e.g., employee steals
cash and checks from daily receipts
before they can be deposited in the
bank)

CASH LARCENY SCHEMES

Can occur where an employee has

access to cash

1.

At the point of sale cash register

2.

From incoming receivables

3.

From the victim organizations bank deposits

LARCENY - AT THE POINT OF SALE

Cash Larceny Controls

Separate the following duties:
Cash receipts
Cash counts
Bank deposits
Deposit receipt reconciliation
Bank reconciliation
Posting deposits
Cash disbursements

LARCENY AT THE POINT OF SALE

Example

A cashier takes in cash in a

supermarket or restaurant rings up
the sale, opens the drawer and gives
up the change.
Removes cash from the drawer
presses void key to cancel
Voids bill
Voiding transaction makes the draw
balance to register tape

METHODS USED TO CONCEAL CASH

LARCENY AT POINT OF SALE
1. Theft from other registers
2. Death by a thousand cuts
3. Reversing transactions
4. Altering cash counts or cash register tapes
5. Destroying register tapes

LARCENY AT THE POINT OF SALE

Controls

Receipt for each customer ensures

all transactions are recorded (sign)

Sequenced receipts pre numbered

for control

Approval for voids

Supervision

PREVENTING AND DETECTING

CASH LARCENY AT THE POINT OF SALE

Discrepancies should be checked

especially if a pattern is identified
Periodically run reports showing
discounts, returns, adjustments, and writeoffs by employee, department, and
location to identify unusual patterns
Set tolerance limits for shortages
employees to repay

PREVENTING AND DETECTING

CASH LARCENY AT THE POINT OF SALE

Supervisor to authorize voids

Collection of cash during the day
Night deposits
Video surveillance
Enforce separation of duties for
receiving cash, counting cash and
reconciling registers
Surprise audits/cash counts

PREVENTING AND DETECTING

CASH LARCENY AT THE POINT OF SALE

Controls over cash - Upon reconciliation of

cash and register tape, cash should go
directly to the cashiers office
Cash couriers G4/Amalgamated
Independent checks over the receipting
and recording of incoming cash

LARCENY OF RECEIVABLES

WHEN ?

Theft occurs after the payment has been recorded

HOW?
1. Force balancing
Having total control of the accounting system can overcome the
problem of out-of-balance accounts
o Can make unsupported entries in the books to produce a
fictitious balance between receipts and ledgers
o

LARCENY OF RECEIVABLES

2. Reversing entries
o Post

the payment and then reverse the entry

through discounts

3. Destruction of records
o Destroying the records can conceal the identity
of the perpetrator even though the fraud has
been discovered

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

CASH LARCENY
FROM THE DEPOSIT

Deposit lapping

Day ones deposit is stolen and is replaced

by day twos deposit . . . .
Fraudster is always behind in deposits
Difficult to conceal
Successful when there is no segregation of
duties
Importance of bank reconciliations

CASH LARCENY
FROM THE DEPOSIT

Deposits in transit

Carrying the missing money as a deposit in

transit but it never clears the bank statement

Eg Max & Cos bank statement cuts off on the last

day each month. Deposits made on that day will
not appear on the bank statement. In order to
reconcile classified as deposits in transit. Will
show up next month. Should clear when deposit
comes in.

PREVENTING AND DETECTING

CASH LARCENY FROM THE DEPOSIT
1. Separation of duties is the most important factor
2. All incoming revenues should be delivered to a
centralized department
3. Compare the authenticated deposit slip with the
companys copy of the deposit slip, the remittance list, and
the general ledger posting of the days receipts
4. Two copies of the bank statement should be delivered to
different persons in the organization

PREVENTING AND DETECTING

CASH LARCENY FROM THE DEPOSIT
1. Documented procedures
2. Require that deposits be made at a night drop at the
bank daily deposits
3. Bank Reconciliations
4. Review timing of the deposits same day/1day after
5. Cash pick up system security company

CASH LARCENY - QUIZ

What is the difference between

Skimming and Cash Larceny?

CONTROLS

SKIMMING

Theft of cash from a victim entity

prior to its entry in an accounting
system

Off-book

Money is never recorded

No direct audit trail
Its principal advantage is its
difficulty to be detected.

CASH LARCENY

Intentional taking away of an employers

cash without the consent and against the
will of the employer.
There is an intent to steal.
Takes place after the cash has been
recorded in the books
Leaves a trail

COMPARISON
CASH LARCENY

ON BOOK
INTENTIONAL
AFTER CASH IS
RECORDED
LEAVES A TRAIL

SKIMMING

OFF BOOK
DIFFICULT TO
DETECT
BEFORE CASH IS
RECORDED
LEAVES NO TRAIL