Question

A receptionist/bookkeeper at a small dental practice was the only one who knew the software to track patient data (i.e. bills, payments) as well as being the one who prepared deposits of receipts for the bank. She figured out how she can input data and prepare a deposit slip for the owner to take to the bank before inputting cash into the system. The deposit slip given to the owner did not show certain cash receipts, and hence he had no idea the bookkeeper had in fact pocketed the money. She entered the cash into the system after printing the deposit slip, just in case a patient should ever be questioned about his or her account. The bookkeeper left the job without being caught. However, a patient came in after she left and asked for a receipt for the cash she had paid two weeks before. The new bookkeeper, not yet familiar with the system, asked the boss for the deposit slip he had so she can give the correct amount to the patient. The slip had no cash deposit on it however. They went into the computer file and figured out what happened.

1) Identify risks and/or red flags in this case that provided the opportunity for fraud.

2) Identify controls that needed to be put in place that might have mitigated this risk.

3) Is this skimming or larceny? Explain the difference.

Answer 1

1. No proper managerial or other persons involved as to whether the cash(asset) is properly recorded or not in the system concerning it. It's known as asset misappropriation. Giving full access to the bookkeeper and no proper check by the owners/management is not involved. Deposit slip has been given to he owner without entering the amount so that she can manipulate it later is what the fraud happened here.

2. i. It is very important to spend time and know the employees so that their motivational instinct to contribute to the business increase.

ii. Proper internal controls such as documentation of the receipts in the above case reduces the risk of fraud as the owner gets daily or weekly time to notice them.

iii. Presentation of employee or bookkeeper in the case is necessary in case of any doubtful transaction in his/her vocational leaves.

iv. Hiring experts is mainly necessary to know the fraud which is even about to happen or happened but not recognized. but it has a limitation of expensive element.

3. This is Skimming as the organization has no chance accounting for it. Where larceny is theft of cash after entering into the accounting record.

Here, the bookkeeper has found a way to input wrong receipts of cash and printing deposit slips for that amount only. She did not even enter the amount into the system, so this comes under Skimming.