Question

Refer to the Focus on Fraud feature Common Fraud Schemes Relating to Cash Receipts and describe three schemes. Prepare a brief summary of a fraud scheme that you have learned about in your local community.

Answer 1

Embezzelement Of Cash receipts may occur in the following three Instances:

1. Before Initializing sales transaction. This occurs when a cash sale is done in a retail store and before depositing the cash into the Bank. This fraud comes to light when the Physical Stock or Inventory is Less than that shown in the books of Accounts. This is even done by recording the sale with An Amount lesser than the Actual sale

2. After initial record of Sales. This occurs by way of recording  an altering  journal entry.

3. Receipts from Non Revenue Sources: This Can be done when Cash collected from Bad debt customers. Purchasing department receives Disounts on payments which is not recorded.

4. Illegal or Fraudulent Disbursements: This may be done by the Cashier by falsification of Hours worked, False names in the payroll, Phony Vendors are added in the Payables and recording payments to them.

5. Petty cash Frauds: This can be easily by raising false vouchers.

Methods to control Fraud

1. Identify the Depatments which receive cash Directly from Clients and customers

2. Identify the Sources of funds and request the source to provide the list of payments

3.Trace the receipts and payments. If there are anything missing, you have uncovered a fraud

Brief Summary of Cash Embezzelement by a Employee in a Chartered Accountant Firm for over 10 years in Chennai, Tamil Nadu

An Audit Assistant collected cash from new customers for applying Pan card and other Nil return tax Filing. He collected extra cash from Existing Customers for the Audit and Filing services Done but reported in the office for Lesser amount of Audit Fees. This, he was able to achieve as he gained the confidence of the clients as he was personally in touch with them and the clients were happy with his services. The clients did not have any doubt about him. The employer also had much trust with him. He embezzeled cash to the tune of INR 2,100,000.00. This figure is only a part of the fraud. There are possibilities for a higher Amount.

This came to light only when he started demanding the Clients for a Higher amount of Fees and built a House in the Porche Area. The appliances in his house revealed his extent of fraud.