Create Your Simple Cash Receipt Template for NPOs Effortlessly

Simple cash receipt template for NPOs

good afternoon welcome to this video in which we're going to look at various types of fraudulent schemes in which employees miss appropriate assets in some cases they're outright stealing of assets in some cases they just abuse of assets but in either case it's the employer that is denied the use of their ass at the axis of their asset so let's take a look at some of the very some of the schemes and what an employer can do to prevent this from happening so the major categories of fraud are hazardous misappropriation corruption and abuse this is when the assets themselves are directly not stolen but the company's name in reputation is at stake by making use of some of the advantages and individual has because of being affiliated with or having access to something within the company there's financial statement fraud now and other types of frauds of course these are the topics three topics will be discussed in subsequent chapters so when we talk about asset misappropriation we are looking at skimming and larceny these are the two major categories of fraud that we will be looking at we will see what they are and what a company can do again again to prevent that from happening ok so it's giving in larceny what we are concerned with is first the technical definition and then how it happens so the skimming is the stealing of the asset happens before it enters the books so before you have actually done it your entry before it's recorded anywhere the asset is already gone larceny after it has entered the books it's stolen so these are two different ways in which it is stolen whether it's really a timing difference but the method of stealing the method of cover-up use PI employs is going to be different so let's take a look at skimming schemes first so here we have theft of cash from a victim entity prior to entering the athough accounting system recall it the off-book fraud and because it is not in the accounting system it is really hard to find where it's happened because there is no audit trail if it was in the system we could not track it we could have some way of checking what happened to the money it can occur at any point may cash enters a business so whenever cash comes into the business it could happen and we're going to look at some of the most common ways in which it would happen now recall cash enters the business when think of the statement of cash flow cash into the business in the operating activities Benet and there's a cash sale or a collection on a credit sale that's the most common way in which cash is coming into the business if you're looking at investing activities cash comes in when assets are sold when you're looking at finance activity cash comes in when cash is borrowed for investors put into the power of money to the business our focus is on those sales transaction the cash sales and the credit collection of credit sales so here we will want to look at the sales and the receivables as I just mentioned so what happens in the sales transaction if it's at the point of sale it's fairly simple a customer gives money the employee collects the money and then delivers the goods or services seems rather innocent when we talk about it has a single transaction we have one customer that gave cash to one employee the employee cave the goods and services in this case we talk home of a fast food restaurant giving the on the meal to the customer can straight forward now let's magnify this for a company we are looking at many customers giving lots of money through numerous transactions not just one employee but now too many employees all these employees now in each of these individual transactions has to deliver the goods or services again we talked more delivering food to all these customers so there is a lot of potential for lots and lots of things to go wrong over here and we will see what they are and how companies try to combat the situation so continuing with the sale skimming it's the most basic type of skimming when the customer makes a payment there is no record of the transaction the employee connects the payment delivers the goods to the customer and never records the transaction so effectively what has happened the customer has given up the inventory but never received cash cash has been stolen from there so they have lost the inventory by way of not receiving cash there could be a cash register manipulation someone may register may manipulate the red cash register they could have after our sales let's say for your business your businesses opens at 10 a.m. in closes at 8 p.m. after the business closes an employee has three sales transactions it's never entered in the books and those things are gone of the books you're looking at transactions only through 8:00 p.m. because that's when it closes another is off-site employees your employees who are working at now the location you're basically relying on their good faith that they're going to report all the sales that happen in that off-site location faith is Girt trusting employees is good but you want to verify in from what you will be looking at in the semester you want to have as many internal controls in place to make sure that first of all it never happens and if it does happen I have a way of catching my employees for stealing obviously if I have poor collection procedures I'm going to be losing a lot of money there could be an employee under state sales so the sales transaction takes place the customer gives cash to the employee they come the employee registers the transaction but for a smaller amount not the full amount gives the inventory whatever has been purchased the full amount but the journal entry is done the recording is done for a smaller amount and another old trick in the book is if there is cash that has been collected put down that he received checks checks are also considered cash but if I put down a bad check it's not cash and I really do not have the right to take cash and put a check in over there even if that my check is good that's stealing it's still stealing so employees can steal money from an employer in any of these ways they're feeling simple in terms of how they could steal it and an employer is vulnerable a business is vulnerable and they need to take care of themselves and they could also be theft in the mailroom again we'll take a look at this a little closely later on so what can I do to prevent this from happening it's always good to prevent well if it does happen how do I detect that is happening so first of all let's see if I can have some kind of oversight if I'm a larger business and I can have supervisors I can have management that is walking the floor it automatically gives a sense of fear to most employees they don't want to be caught and therefore they're more they are less likely to steal if there's management present if I could have some kind of video surveillance remember as we had discussed earlier you cannot do this without notifying your employees your customers and you have video surveillance this fairly common most businesses will tell you that smile you're on camera basically to alert you that someone is checking what's going on within on floor something that always is very effective as you basically engage your customers and ask them to complain if they see something wrong a lot of customers do get upset when they see stealing because they are paying for the goods and they don't like the idea that the money is being stolen by the employee and they are likely to complain especially if the service is for if something has happened you're likely to get customer complaints so always keep the door open for tips also when you have multiple cash registers it is always a good idea for every employee to log in and log out that way we know who has been at which register and at what point of time activity logs for off-site personnel we want to make sure that people who are at a different location that this and we have logs as to when they logged into our system and now a technology it's fairly easy to make sure that you can keep track of employees knowing exactly where they are with GPS tracking how much work they have done which customers have talked to so there are ways in which we can have fairly detailed activity logs always the less opportunity there is to steal the better off you are going to be in the air our customer is going to be remember the fraud triangle you don't want that opportunity don't give them the opportunity as far as possible now let's take a look at receivables so now we are looking at a credit transaction where the same transaction has taken place that part has entered the books but now the cash is coming in on the roof for the receivable before it can be entered is getting scaled now slightly more difficult than sale skimming where it was cash coming in now we are looking at cash coming in on a receivable receivable payments are log are not locked into the accounting system so when the money is received I am not writing down the journal entry where it's gonna say cash debit accounts receivable credit now how could I get away with this because the customer who has made the payment obviously is going to say I made the payment while sending me a second invoice why are you asking me for money say a common way in which employees try to defraud their employer of this money in a receivable skimming scam is they will do what's called lapping lapping is basically you the first customer that makes a payment you have stolen the money you wait for the second customer to make payment apply to the first customer then wait for the third customer to make the payment to apply it to the second customer so on and so forth so this gets a little more involved but once again that first check was stolen before it could be entered into the system forced balancing basically saying I'm just going to go ahead and do a journal entry to make sure that the accounts balance out even though the cash is not there there's there you'll have to cover your tracks a lot more if you do that well the covering the tracks at some point of time there's going to be a bank wreck silly Asian the bank is gonna send a statement and someone is going to be looking to see if the journal entry was there that the money was received how come it's not there in the bank so an employee could steal that bank statement and not let anyone see that bank statement or they could actually just write off a receivable so the journal entry that you should have which would be cash debit accounts receivable credit you've taken the cash you took the check and cash it yourself so instead of doing cash debit allowance for doubtful accounts a bit accounts receivable credit will take care of that problem I take that off my books or I give a big discount to that customer to make sure that that customer didn't have to pay the money so these are basically book entries to cover up the skimming that has happened debiting the wrong account that's kind of similar to lapping where you're basically trying to debit wrong accounts for various amounts of money that has been received from different customers all of these are rather involved obviously it's an inside job as in someone who has access to the books can do this the most desperate way in which you would cover up your tracks over here would be destroying or altering records of the transaction this would be a little desperate in that you something is gone it's gone it's missing and any time records are all together missing it gets a little scary for employers and they know something is there something is amiss over there especially the auditors will be concerned about it so what could I do to prevent this from happening strong internal controls this is going to be the repeated message in the semester the better your internal controls you will have your asset safeguarded and if there is a problem you'll be able to detect it now if you are learning of company it can afford it separation of duties is always a very very valuable internal control another another suggestion that many the fraud examiners and auditors will have is rotate the jobs don't let one person be on the same job year after year because if they have been on the same job they have created a system where they can bypass any kind of checks and balances that may otherwise be in place if there's an employee who is not taking vacation at all I would be extremely concerned they have something to hide I don't think there's any employee who loves their job so much that they will never take a vacation that they have earned so this is a good policy that companies have where they force everyone to take a vacation and get someone else to come and do your job for two weeks that way someone else can see if there's something glaringly mr. or miss over there obviously if someone is a very clever fraudster they will make sure that when they go on vacation no one can detect any of the things that go wrong over there but it's one way in which you can probably catch someone who is doing something wrong for certain journal entries there are non-routine get someone else to do a write off okay so if it is you are saying that the customer has not paid the money and you need to write it off the person who routinely does the journal entries should not be the one doing the write of someone else typically a supervisor should be the right awesome and there are discounts being given exceptions be made the supervisor should be involved this would be similar to in case of cash transactions at a retail store if you go to a grocery store and you are in the process of checking out your items and there's one item you decide you don't want to buy for whatever reason as a customer you have the right to say I don't want that item it looks different to me right now it's more expensive whatever the case may be in most retail businesses the employee is not allowed to take that item of that transaction they will call a supervisor and the supervisor will come and void that one item and let them proceed these are basically outstanding internal controls to make sure that an employee is not bringing up items voiding your transaction there could be all kinds of things that the employee could do if they have that privilege so even when you're looking at accounts receivable right should be done by someone else segregation of duties your audit staff should be trained properly to know how to look for certain weaknesses in your business remember when you have auditors come in they may not know all the nuances of your particular business you know some of this you're close to the business but you want someone else to do the checking which is why you have these auditors come in both your internal audit staff and external auditor should be trained well in what to look for in your business and then there are so many automated tests we can now do a data analytic software use all of those to make sure that you can find if someone is cheating and stealing from you another way in which it are an analysis that is done is aging of your receivables to see is there any pattern is there any receivable that's all if you had it's a receivable is old and you have stole the customer several times why have they not responded to you it could very well be that the employee who has stolen the cash has never sent a notice to that employee to the count to the customer so the customer is not aware that their account is still outstanding so if you look at the aging of receivables and you see a receivable that's very old call the car pick up the phone call that customer and ask them what happened and if they say they did send a check ask them was it cashed show me proof and if they do then you know that you have to follow up and find out what happened to that check let's look at some of the cash larceny schemes now cash larceny larceny means after it has entered the books so someone is intentionally taking away the cash against my will I'm the employer so money has already appeared in my books and then it was stolen and where could it be stolen well anywhere there's cash it could be stolen so it could happen a point of sale it could happen from incoming receivables it could happen from deposits bank deposits and we'll talk about that so point-of-sale some things we've already talked about over here are a large percentage of cash larceny schemes occur at point of sale and that's because we're them that's where the money is so where would I steal from are more stealing from my own register I'm stealing and the employee and I'm stealing from someone else's register maybe they asked me to cover them for a few minutes maybe I went there to do something their back was turned any of those situations happens especially when tis very busy and in any of these cases if someone is stealing probably if you had management on the floor or you had video surveillance you could catch them another common way in which have noised employees will defrauded an employer is what's called death by a thousand cuts that is you're not stealing any one time any large amount you're stealing small sums of money it could be like a couple dollars a day but all of these add up to be significant amounts in the long run and if there are multiple employees doing this the employer is going to suffer losses very quickly I've already discussed the reversing transactions voiding a sales transaction recording unauthorized discounts never given to customers an example of this is at restaurants when in him when a customer receives the check at the end of their meal and they're ready to leave it's not uncommon where a customer will look at the receipt and say look at the check and say okay I owe let's say $25 and they leave let's say $30 over there $25 to pay their bill and $5 as a tip they just leave it on the table and they walk away the employee could take that receipt go back and apply a discount saying they gave a coupon and instead of $25 now it is only $20 now the customer has paid $20 plus a $10 tip it's actually $20 $5 was stolen from the employer and a $5 tip the customer is none the wiser because they've already left the business the employee has effectively stolen $5 by way of a discount unfortunately this is not an uncommon problem at all in many restaurants altering cash counts of cash register tapes again these are more involved in that someone is proactively seeing not only am I going to steal the cash I'm going to try and cover up how I'm stealing my kid the cash and most desperate is destroying the register tapes so how can we prevent this from happening again strong internal controls if you can have segregation of duties anytime there is a discrepancy between sales record and cash on hand you need to investigate immediately so how does this happen at retail businesses you may have seen at the end of a shift an employee when they are leaving a register they take their cash drawer with them and they go back to the supervisor the supervisor is gonna count the cash check it against their sales record and if there is any discrepancy they have to explain it immediately they not give in time to even leave their shift until this discrepancy is resolved that is a really strong and effective internal control to have in place this obviously assumes that you have supervisors who are there to count cash as there's a turnover of your the shift the next before the next employee comes to have this are all going if you do not have that losing cash between ships is a rampant problem what else could we do reports on discounts returns adjustments and other concealing transactions should be analyzed okay so if there's one employee giving discounts there's one employee who has more returns and adjustments in anyone else either they have been very fully trained these employees are just not good employees good workers or they are stealing so you need to find out immediately what's happening so if you print out reports and do it a near-daily analysis you're likely to find the person who is doing this and put it to an end immediately larceny of receivables this is stealing cash from incoming payments they hide imbalances caused by frauds force balancing reversing transaction destroying records these all things we talked about let's talk about cash larceny from in deposits now this is from the time either it was a cash transaction and cash was collected or it is receipts that are the receivables where payments have come in and I have checks the cashing checks have to go to the bank you have to be the pastor in the bank so it's from the time it has come into my books this is larceny which means it's entered the books we have done the journal entry cash debit sales credit orbeum down the journal entry cash debit accounts receivable credit in our books but this cash has to now go to the bank so what happens over here so this is money has taken before it is deposited it is difficult to conceal because it's already in the books most common way in which I can cover up is deposit lapping or just say these are deposits in transit all of these are easier said than done but again they're done that's why it's being discussed over here so how could I prevent this from happening I have to take the cash from my business to the bank okay is it possible the bank to come to me well the bank won't come to me but I could do something different I could have pay for armored truck service where the armored truck comes and picks up the cash so after we have done the journal entry we have the cash of the safe they're going to take it on a daily basis or a weekly basis and take it to the bank depending on the level of service I have and how much I pay for the service they may count the cash at my business therefore taking it to the bank or they may just take it to the bank and the bank accounts the cash for me another option would be I don't get into this business of cash I encourage all my customers to use credit cards and debit cards obviously there is a cost associated with it however that cost may be smaller than the cost of the cash larceny your cash skimming that could happen and trying to uncover who did it how it happened etc so the price may be small to be there's a cost to doing business and this could just be one of positive billing business after you have deposits made get itemized deposit slips so I just don't want to know that $10,000 was to faster today in my account I want to know what that $10,000 dollars consisted of was it checks how many checks was it was a breakdown of the checks was it cash how many $10 bills how many hundred dollar bills all the breakdown so that it makes sense is this kind of what I was actually depositing or not and then compared your deposit slip to that of the organization the deposit slip that you received from your employee I could turn in a Wells Fargo deposit slip saying yep $10,000 was deposited these were all the checks that was the past everything is correct but did it go into the company's account or did it go into someone else's account those are things you need to watch for very closely may sound a little strange but yes it does happen half the bank delivered two copies of the bank statement to do to do two different people in the organization why because a record previously we said a desperate thing that an employee may do is destroy that bank statement before bank installation can be done now if you have two statements coming in then that person is not going to get away scot-free these days you could actually do this more effectively by way of looking up online transactions on a daily basis so there are more ways in which we can handle the this problem but it's still always good to let employees know the bank is going to send us two statements so it's not just you someone else in the organization is also getting a bank statement now let's shift gears and look at non-cash assets is it possible for it to be stolen absolutely yes what kind of non-cash assets can be stolen well pretty much all that so we are looking at inventory supplies equipment and any other non-cash asset that can be stolen will be stolen so how does this happen misuse I come to school what should I use my computer for over here what should I use a form for only school work is it possible I use it for something else surfing the net maybe going onto Amazon and doing some shopping going and looking at vacations yeah I could do that that's misuse of assets that was not the intended use so we're looking at misuse of assets also as a fraudulent we have a fraudulent scheme unconcealed larceny and we're going to get it to each of these in a little detail as to how these happen less larceny is stealing unconcealed is they're not even bothering to cover up this the stealing requisitioning and transferring the purchasing and receiving false shipments many many ways in which this happened so let's look at miss useful of assets over here so misappropriation could be misused for stealing unauthorized used of company assets with false statements so I say I'm using my asset only for what I should be doing but I'm using it for other purposes especially if I profit from it that is I get outside income by being on that computer by using that phone that is definitely unauthorized used of a company asset use the father's equipment to do personal work on company time I am billing the company for my time and getting paid and I'm using it to do some work of my own cost of inventory abuse different types of inventory abuse we're going to look at so let's look at the some of the abuses how they happen the employee takes property from the company premises without attempting to conceal it in the books and records so someone is stealing inventory they're not even bothering to hide it they're taking it quite open in the plain plain side so how do they do this why would they do this well obviously they're doing this because they feel justified they feel justified in that management gets all kinds of things we are just workers we don't have this privileges and therefore I can take some of this inventory no one is going to miss it's not going to hurt company all the usual arguments there could be a sale I basically said purchase the asset the inventory item and I walk out with it think of someone working at a pizza place is it possible that they could buy a pizza yes they could buy a pizza at the end of their shift in take it home now is it possible that they actually just took a pizza and said that they made that piece now that it was a purchase transaction they could do that too so in some cases the employee doesn't even bother to cover up what they're stealing now I have a quick story Stanley Black & Decker this is a company that is a fortune 500 company and it's near and dear to us because it's right here in Towson our Black & Decker was here and they were merged with Stanley which is out of Connecticut so the founders son this was way back in the early 50s he found that there were several employees that was stealing small assets from the contractors the defense contractors they but big in the defense contractor defense business back in the 40s and 50s after World War two and the CEO of the company said he thought it was very strange on Friday evenings all these little assets were disappearing and then come Monday morning all the assets were back on the floor and then the employees were doing all the work that they were supposed to do again Friday afternoon evening all those assets for disappearing so he talked to the foreman and went and talked to all the employees on a Monday morning and asked why what's happening to these assets I came on the weekend I didn't see it and a lot of these employees said oh we just borrowed it because we have some work to do at home and Decker junior decided that this was actually an opportunity and he decided to flip the situation and he is the one who started the entire DIY business that we know of today he actually started saying that instead of being only in the industrial tool business how about having small tools that we can sell to the general public and he asked his employees would you buy this if you could have bought this and they all said yes so what was a situation of unconcealed larceny turned out to be an opportunity for Black and Decker and they have changed the face of how business is done and how all of us handle various things at home small projects at home you no longer have to call a contractor to do small projects we can pick up the ham or we can pick up the drill and do our own job the point over here really is that this kind of larceny happens all the time you may be a big company you may be a small company it happened in the past it happens now it's going to happen in the future what can you do to control the situation of flippity your advantage is a real key here so let's see how I can prevent and detect larceny if non-cash assets if I can have segregation of duties who is requisitioning the items that are being purchased that purchasing function keep it separate from the requisitioning so the person requesting that the company needs XY and Z should not be the one placing the order for X Y and C and then the person who receives the XY and Z should be a third party usually this is feasible in large companies small companies it's not going to be feasible the person who requisitions may probably be different from the purchase who does the purchasing and the receiving what is it in receiving in lots of places the same person it's not going to be segregated but again large companies if they can they should do this wherever possible lock your assets so in a lot of financial companies as an example it is very common for everyone to have laptops in a lot of cases what they would do is they have desktop computers and laptop computers and the expectation is you bring your desk your laptop computer to work or it is stored at work and it is locked couny when you go out offsite you're going to be assured that laptop so that it's constantly coming back to work and they have some kind of monitoring sometimes it seems a little excessive but remember it's not just a laptop what do financial companies need to worry about they need to worry about data that you're carrying also so they do have a lot of controls in place restrict access to only authorized personnel basically don't have anyone walking around anyway because then you don't know who has stolen what if you have security cameras in place that helps a little too but it's going to help only really after the fact that is after someone is stolen something is lost then you're going to look at your security cameras remember trying inform employees that they are being videotaped all the time even if you do your perpetual inventory count all the time it's always a good idea to do periodic inventory that is it just for walk on the floor and actually physically count your inventory and anytime a customer is going to complain about something keep an open ear have some way in which you can record these complaints because that's typically your best bet of finding out that your employees are doing something wrong okay asset requisitions and transfers someone within the company is using an internal document to gain access to merchandise now is it possible that they need it absolutely how so this is going to run if they don't have they don't requisition for various items whether it's goods or services whatever it is that they're in the business I need to have my whatever I need my tools to to the trail in order to do good enough to run the business now is someone just using these documents to move play move assets from one location to another absolutely possible okay is it possible for someone to overstate what is needed and then pocket the excess yeah unfortunately yes that's now government agencies tend to have this problem a lot of it they tend to overstate what they need and the reason they do that is because they are in a budget they work on a budget system they have to budget a year in advance what they they have to project what their needs are for the next year and we all know whatever you ask for you will get at least ten or twenty percent less so if I ask for 110 120 percent well maybe I'll get 90 to 100 percent of what I think I will need now that is if I was just doing things in the normal course of business how about if I intended to defer them my employer I can pad that budget and say I want more and then keep that more the excess for myself falsify forms and remove non-cash assets from warehouse or stock rooms again these are things that are done very frequently and it's a matter of how often it is done and to what scale it is done how the magnitude of the scaling that happens purchasing and receiving functions how could they be used to facilitate theft false billing you purchase merchandise that the company doesn't need and then you are billing the company and the company is paying for it because all the paperwork is in place the paperwork is in place but your purchased merchandise that was not needed at all non-cash misappropriation intentionally purchased and but misappropriated by the fraudster give you another quick example over here in recent years a lot of businesses are moving to digital records all digital records so they don't need anything paper oriented so I don't need to purchase as much paper as before I don't need to purchase conv looks as much as before think of it if I had to print an invoice and mail it to my customer I needed paper I needed the envelope I needed ink all of those things I need to send them a reminder and a reminder I need lots of people lots of phone booths etcetera now everything is being done electronically we don't need as much paper but if I continue to purchase paper and envelopes this is misappropriation what am I doing with all this and if you actually go and look at some agencies such as some businesses such as hospitals and a larger business where people are not paying very close attention to these items there are people who are stealing this they're taking it home and using it for personal purpose or trying to resell it on eBay and Amazon or wherever else so the misappropriation is is rampant is they're falsifying incoming shipments here the fraudster creates false shipping and sales documents to make it appear that the inventory was sold not stolen so here what they are saying is that a sale transaction happened and that the item was shipped but it was never shipped there was no sale they just stole so they're just inflating it and saying that there was a sale that happened over there there's less likelihood of you getting caught because you're not stealing it here because even having it shipped to your home perhaps they're even delivering these goods to you so you understand the legitimate sale so accomplices billed for less so your what you're doing over here is you're saying that there is a sale that's happened and you're offsetting one sale for another sale so again this is done by people who are close to the business as in close to the books they have access to the books so larceny typically you're looking at someone who has access to the books because they can then cover up their fraudulent behavior what are some of the other schemes employee tailor they attached to the organization what does that mean they basically know this is an inside job I know where things are how things move through the organization who is looking at what and ingly I design how I'm gonna steal so I know the security system I know how the records are kept I know the building layout I know all the day-to-day operations so this is a complete inside job where I have planned the theft it's not in the heat of the moment that I one title this is something that an employee is doing because they they know how they can steal from a company write off assets to make them available for theft so this is another in retail business it's not uncommon where you would have an employee write down mark down an item and say that this item is heavily discounted and then they purchase it themselves in that case they're still at least purchasing in it's regarding as a transaction if you write off an asset you're saying this asset is worthless and then they take it well when they take it yeah they are stealing even though you said that the asset is worthless it's truly not worthless it is oh it could be actually sold at a profit perhaps form by the company but because you have made it worthless the company is not going to make an effort to sell it some companies have a policy where if an asset is worthless they will still give it away to a not-for-profit they don't let the employees just take it and in some cases they might tell the employees we will sell it to you at a discount they will not just give it away so employers can try to protect themselves even in the case where employees try to manipulate the books how do you know if inventory is getting stolen how do they cover it up what's the concealing method over here unaccounted for a reduction in inventory where is this inventory go okay so if this is unaccounted for which means there is no way to explain it there is the counted for reduction in inventory there is always linked egde we know about that you learnt it in cost accounting we're talking about something is unaccounted for question is made at that inventory Co is this a red flag with someone or to the inventory records do we have fictitious sales and accounts receivable in our books is someone stealing it that way did someone write off the inventory is a physical paddy just like your accounts receivable pairing those deposit pairings we talked about employees will even resort to physical which means they could prop up 20 empty boxes and next to five boxes that actually have inventory those 20 empty boxes are the represent the stolen merchandise so that if someone comes to count the pallets count the boxes on the pallet they'll say oh yeah there are 25 boxes are they all as well so what's one way in which you can make sure this doesn't happen actually open those boxes okay there are again using technology to your advantage companies like ey and they do physical count of inventory they use drones to count the inventory they have heat signature to find out others boxes empty is there something in that box there are various ways in which you can use this to your advantage to find out what happened to the merchandise is ordered inventory records again just like bank reconciliation someone could try to force any inventory reconciliation that is my book say there are 15 or 500 units of inventory I go and count the inventory there's 450 50 are missing but I just wipe that there are 500 piece of inventory so first act of fraud was stealing now the second act is lying that there are of those 50 are not stolen so this is going to make give the appearance that there is no shortage we have talked about fictitious sales in accounts receivable creating sales to mask that that's theft of accounts you debit accounts receivable you credit sales what does it do now you have all these receivables in your book now you could either just say that these receivables now are uncollectible and fight them off to cover up so now what you're looking at is there are layers and layers and layers of ways of lies that are there when there is any kind of theft or some some employees fraudulent fraudsters will sell to large clients large clients are very very large customers the volume of transaction is very large the dollar amount is very they will not notice a $5000 $10000 and in some really bizarre cases well they're not bizarre it's basically the other company your customer they are very poor internal controls as long as they receive a bill they're gonna pay that bill they don't even bother to see whether they receive the merchandise and clearly this is the case where you have stolen from your employer now you are passing that problem on to the client and that clients accountant makes the payment now that accountant was not doing it is not technically a fraud but they have misappropriated funds they have made a payment to a vendor from whom they never received merchandise they have been defrauded now writing off receivables again is a common solution for fraudsters again make sure that this function is is decoupled you don't want the same person doing both the collections and the right of of receivables [Music] you had a brief interruption where there hopefully this is not messed up my mania too much let's continue over here with physical padding of inventory here as I explained a fraudster would make it appear that there are more assets then that are actually present over there setting up empty boxes setting up a wall of products there nothing is behind the wall since rather naive if someone would be naive to believe that this crash will be happening but obviously the fraudster knows when and how to do these kind of things so how could you prevent this from happening separation of duties who orders the goods who receives the goods who maintains a perpetual inventory records payments made all of these need to be separate functions larger businesses can do it but don't isolate them to the point where they become silos where when someone is who receives a bill just makes a payment without actually checking to see if those goods were receive if goods are received check to see who requisitioned it does it make sense why does goods were ordered match invoices to receiving reports match packing slips to purchase orders to prevent health fraud from happening over here monitor increase in bad debt expenses so if you are writing off too many expenses too many of these receivables there's a pattern over here in terms of what what you possibly is going on behind the scenes continuing on with this reduction to perpetual inventory should be properly supported okay so if you are doing perpetual inventory and there is shortages over there is there any documentation explaining why there are these shortages so if someone is doing a reconciliation to physical inventory and reducing the numbers can you explain why that was done reconcile materials ordered for projects to actual work done so if I had to paint five rooms and I purchased paint for ten rooms why was this done so if there was paint purchase for ten rooms we need explanation as to why there was double the quantity purchased maybe there is a good valid reason but you need to find out what the case may be what the reason is okay periodically performed trend analysis on inventory so just as you would do trend analysis on receivables you wanted a trend analysis on inventory anything that's been designated as scrap there be said if there was something or receivable that was outstanding too long or had been written off here we are looking at anything that has been written off as scrap only remove assets with proper authority so if an asset has to be discarded only the person authorized to do that should be doing it not just about anyone who feels like it or I just decide I don't want like this computer on my card in my office on my desk and I'm just gonna take it and place it somewhere else I just put it away or get to my home now that's not to be done I have to have proper authority to move it remember skimming and larceny it happens all the time why does it happen go back to the fraud triangle anytime there's perceived opportunity that I can steal there's an employee that's going to say why shouldn't I steal it the rationalization is always there well they're not going to notice if I take a little inventory they're not going to notice if I do a little of my homework on the computer during work hours I work later on but if you're working later on you're probably charting you overtime to the company rationalization you can rationalize just about anything and if someone has financial pressure they're likely to steal anything in everything they're desperate so any of these or any combination of these three prongs that you have over here is going to lead to skimming and larceny you need to be aware of it don't be foolish thinking not in my company it doesn't happen over here think about it what can you do to help your employer your own business what can you do to prevent this fraud from happening so there's lots of room for us to think about what we can do to prevent it in the first place and if it is happening what can we do to stop it from half