Question

1. Derive your own fact pattern or case that demonstrates your knowledge of skimming and answer the following questions - 10 points What piece or pieces of evidence do you see as most proving your case? Why? 10 points. After you have discussed the evidence do you believe you have enough in terms of totality of the evidence as as whole? Why? 10 points. 2. Cash Larceny - do the same as in # 1 above. 30 points.

Answer 1

Solution

Skimming

Skimming fraud is a type of white-collar crime that involves taking the cash of a business prior to entering it into the accounting system. Skimming is an “off-book” fraud because the cash theft has occurred before it is entered into the bookkeeping system; thus, it is never reported on the company’s accounting records. Individuals are also vulnerable, and can experience ATM, debit card, and credit card skimming.

Among other types of white-collar crimes, skimming is the simplest form of fraud. However, skimming is the most difficult to detect because it does not have audit trails that can reveal the source of the theft. Frequently, skimming is detected by accident. However, in some cases, businesses can suspect potential fraud by discovering lower than expected revenue.

Example of Skimming

Sam is the owner of a hot dog stand. Recently, he hired a new employee. After two weeks, Sam discovered that the hot dog stand’s profit (significantly) decreased by 40%. He started to suspect potential fraud from his new employee, and he decided to install a hidden camera in the stand to watch the production process.

After analyzing the business’ accounting records, he found out that his new employee did not always use the cash register for hot dog sales. He did not give receipts to customers who purchased only hot dog or drink and paid in cash. Also, the customers usually did not ask for receipts because the amounts were small. At the same time, Sam could not detect the fraud from his accounting books because the transactions were never recorded. After this discovery, Sam fired his new employee.

Evidence of skimming

1. Drastic reduction of profit in a short span of time (2 weeks) in spite of no change in external factors.
2. Non utilization of cash register thereby generating "No Sale" transaction invoices.
3. Unrecorded sales transactions due to non issuance of receipts to customers who purchased only hot dog or drink.
4. Payment only in cash thereby leaving no audit trail or evidence.

Totality of evidence

Employee working behind the counter decides whether the proceeds from a cash sale go into the register or his pockets. Skimming occurs when cash from a sale is not recorded in your accounting books. Instead of writing up an invoice, the cash is diverted from your business to your employee. Skimming is hard to detect because it is an off-book crime with no paper trail. In most cases, there is no sales invoice or register tape to prove the sale took place. However, based on above evidence, skimming fraud is correctly detected.

Cash larceny

Cash larceny refers to the act of stealing cash that has already been recorded in the books of accounts during a specific period. This fraud is perpetrated by an employee without the consent or knowledge of the employer. Larceny often occurs at the cash register, cash collection point, or from deposits in transit. However, this form of theft is detectable if the company maintains accurate cash records, and it can be identified during cash reconciliations.

EXAMPLE of cash larceny

A teller for a retail sales company simply signed onto a register, rang a “no sale,” and took currency from the drawer. Over a period of time, the teller took approximately $6,000 through this simple method. To get away with the theft, the teller waited until a coworker was on break and then logged onto that person’s register, rang a “no sale,” and took the cash. The resulting cash shortage therefore appeared in an honest employee’s register, deflecting attention from the true thief.

Evidence of cash larceny

1. Larceny is often easier to detect than skimming because the stolen funds have already been captured in the accounting system, and therefore, leave an audit trail that can be discovered during reconciliations and cash audits.
2. No sale transactions are often alarming evidence of cash larceny especially if they are spread over a period of time.
3. Cash shortage in register is another evidence of fraud by way of larceny.

Totality of evidence

Cash larceny and skimming are both common types of fraud that are perpetrated by the company’s employees. They differ in the time of occurrence. While cash larceny involves the theft of cash that has been recorded on the employer’s books, skimming refers to the theft of money that has not been captured on the employer’s books of accounts or accounting system.

Larceny is often easier to detect than skimming because the stolen funds have already been captured in the accounting system, and therefore, leave an audit trail that can be discovered during reconciliations and cash audits. Based on above evidence, larceny can be detected correctly.