Cash is the central point of most accounting entries. Cash, both on deposit in banks and petty cash, can be misappropriated through many different schemes.
Cash theft schemes fall into two categories: 1. Skimming - removal of cash before entering it into the accounting system. Employees who skim from their companies steal sales or receivables before they are recorded in the company books. Skimming schemes are known as “off-book” frauds, meaning money is stolen before it is recorded in the victim organization’s accounts. Skimming is one of the most common forms of occupational fraud. 2. Cash Larceny - intentional taking of an employer’s cash or checks without the consent and against the will of the employer. Most larceny schemes involve the theft of incoming cash, currency on hand (in a cash register, cash box, etc.), or theft of cash from the victim organization’s bank deposits. Because Cash Larceny occurs after the cash is received and entered into the company books, cash larceny schemes are known as “on-books” frauds.
Physical Security of Cash and Checks
• Ensure proper segregation of duties of key personnel
• Review the cheque and cash composition of the daily bank deposit during unannounced cash counts and during substantive audit tests of cash receipts
• Review the entity’s records of the numerical series of printed prenumbered receipts, and verify that these receipts are used sequentially (including voided documents)
• Review the timeliness of deposits from locations to the central treasurer function
• Observe cash receipting operations of locations
• Prepare and review a schedule of all cash receipting functions from a review of revenue reports, from cash receipt forms at the central treasurer function, and from discussion with employees
• Prepare and analyze an inventory of all imprest and change funds by purpose, amount, custodian, date, and location
• Audit all revenue sources on a cycle
• Periodically use comparative analytical reviews to determine which functions have unfavorable trends
• Determine reason(s) why revenue has changed from previous reporting periods
• Confirm responses obtained from managers by using alternative records or through substantive audit tests
• Adhere to a communicated policy of unannounced cash counts
