Asset Misappropriation: Cash Receipts

Skimming and cash larceny schemes and how organizations prevent and detect them.

5 minutes 5 Questions

Asset misappropriation is the most common category of occupational fraud, and schemes involving cash receipts are among its most frequent forms. In the Certified Fraud Examiner (CFE) framework, cash receipts schemes are divided into two primary types: skimming and cash larceny. The key distinction …

Concepts covered
Cash Larceny SchemesPreventing and Detecting Cash LarcenySkimming SchemesPreventing and Detecting Skimming
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CFE - Asset Misappropriation: Cash Receipts Example Questions

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Question 1

Which of the following BEST explains why cash larceny is generally more likely to be detected than skimming, which makes record-based controls effective against it?

Correct Answer: The receipts were already entered, so their removal leaves an imbalance in the books

Cash larceny involves stealing cash after it has already been recorded in the victim organization's accounting system, so the theft creates an imbalance between recorded receipts and actual cash on hand or deposited, which reconciliations can reveal.
The claim that the theft is unrecorded at entry describes skimming, not larceny. Register tapes capturing a missing amount at the point of sale also fits skimming, where funds are taken before they are recorded. Cash larceny is not mainly a manager's scheme, and bank logging of deposits does not explain why the books fall out of balance.
Key concept: cash larceny is an on-book theft detectable through reconciliation, while skimming is an off-book fraud.

Question 2

At a small organization, one clerk receives customer payments, posts them to the cash receipts journal, and prepares and delivers the bank deposit. The owner cannot add staff to split these duties. Which compensating measure BEST reduces the risk that the clerk takes recorded receipts from the deposit and conceals the shortfall?

Correct Answer: The owner opens the bank statement and matches deposits to daily receipt records

Having the owner open the bank statement and match deposits to daily receipt records adds an independent check by someone outside the clerk's chain of custody. Any gap between recorded receipts and amounts the bank actually received surfaces quickly, before the clerk can alter records to hide it.
Letting the clerk prepare the reconciliation lets the perpetrator conceal the shortfall, and the owner's sign-off only reviews work the clerk controls. Comparing sales journal totals to the cash ledger relies on internal records the clerk can manipulate. Daily deposits with validated tickets kept by the clerk leave custody of the evidence with the same person.
Key concept: independent review as a compensating control when duties cannot be segregated.

Question 3

At a bank branch, each teller balances his or her own drawer at day's end. Any discrepancy is posted to a single branch cash over/short account, and the branch manager reviews only the account's monthly total. One teller has been taking small amounts of cash after transactions are recorded, keeping each daily shortage below the level that draws attention. Which control change would BEST reduce this teller's opportunity to continue the cash larceny?

Correct Answer: Track over/short by each teller and probe repeated small shortages

Tracking over/short by individual teller removes the concealment provided by pooling discrepancies into one branch account. Small, repeated shortages then become a visible pattern tied to a specific person, which management can investigate.
Reconciling the branch total to bank records each day still aggregates all tellers, so the thief's small shortages stay buried in the combined figure. Rotating drawers weekly blurs accountability rather than strengthening it. A signed attestation of the count does nothing, because the teller is already reporting the shortage honestly and simply hiding it among others.
Key concept: individual accountability and trend analysis of cash over/short to detect cash larceny.

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