Question

1.      Explain how cash larceny can be caught.

2.      Explain a positive pay system.

3.      How does a forensic accountant determine living expenses when using the net worth method?

4.      Describe the net worth method.

Answer 1

1) Cash larceny is the theft of cash. Most companies or businesses keep detailed paper tracks so that fraud can be caught by going through the paper tracks of the companies or businesses. There is already a record on the audit about the cash and reconciliation will help in finding out fraud in cheques.

2)Positive pay is an automatic fraud detection system offered by cash management system of the banks or companies. It is a system that track down the cheque number, account number and amount of each cheque submitted for payment of the cheques.

3) For determining living expenses forensic accountant has to check the saving accounts of the employees or individual and have to make some assumptions regarding to determining living expenses. Forensic accountant has to determine the standard of living like education, food clothing expenses. This will help the forensic accountant to determine living expenses using net worth method. If the accountant has find any proof about cash which was not reconcile then the accountant can report that.

4) The net worth method shows the the difference between an asset and liabilities of an entity or companies on any given date. The net worth shows the amount by which asset is more than liabilities. Net worth represents the book value or shareholders equity.