NURASHIKIN BINTI ABD AZIS

INV 2024 CORPORATE FRAUD

INVESTIGATION
 Objective of lecture

1. What is skimming?
2. To understand more detail a few examples of
skimming schemes:
 unrecorded sales
 theft of cheques through email
 short term skimming
 converting stolen cheque
3. Concealing the fraud
 Definition of skimming

➢ Skimming is a type of white-collar crime that involve
taking the cash of a business PRIOR to entering it
into the accounting system
➢ It is an “off-book” fraud because the cash theft has
occured before it is entered into the bookeeping
system
➢ The fact that the funds have not yet
been recorded mean that the victim
company may not be aware that the
cash was received.
 Skimming

➢ Although skimming is the simplest form of fraud, yet it is
the most difficult to detect because it does not leave audit
trails that can reveal the source of the theft.

➢ Audit trail is a set of documents that validate the

transactions you record in your accounting books.
Who involved in skimming?

➢ Skimming can occur at any
point where funds enter a
business, so almost anyone
who processes cash receipts
may be in a position to skim
money.
➢ This includes:
1. Salespeople
2. Tellers
3. Wait staff
4. Other who receive cash
directly from customer.
Types of Skimming

Understated
Unrecorded sales and
sales receivables

Theft of checks
Short-term
through the
skimming
email
 1. Unrecorded sales

➢ Most basic skimming scheme occurs when an employee
sells goods or services to a customer, collects the
customer’s payment, but makes no record of the sale.

➢ The employee pockets the money received from the

customer instead of turning it over to the employer.
 Unrecorded sales

Example: A sale of goods at a cash register

In normal transaction
1. A customer purchases an item.
2. An employee enters the sale on
the register.
3. Register record will reflects the
sale has been made and shows
that a certain amount of cash
(purchase price of the item)
have been placed in the
register.
 Unrecorded sales

In skimming transaction
1. An employee skims money by
making off-book sales.

2. Impossible to detect theft by

comparing the register record
to the cash drawer because the
sale is not recorded on the
register record.
Unrecorded sales

1. Register manipulation
▪ Ring ‘no sale’ transaction
▪ Lifting the ribbon from the register’s printer.

2. Skimming during nonbusiness hours

▪ Went to work two hours early every day
▪ Employees who work at remote locations or without close supervision

3. Skimming of off-sites sales

▪ Rental-skimming scheme
▪ Independent salesperson, e.g: insurance agent

4. Poor collection procedures

▪ Tenant payments were not properly recorded.
Unrecorded sales
2. Understated sales and receivables

▪

Understated sales work differently in
that, the transaction is posted to the
books, but for a lower amount than
the perpetrator collected from the
customer.
▪ For example;
➢ An employee wrote manual
receipts to customers for their
purchases,
➢ But removed the carbon-paper
backing on the receipts so that
they did not produce a company
copy.
➢ The employee then used a pencil
to prepare company copies that
showed lower purchase prices.
 Understated sales and receivables


▪ Fraudster under-rings a sale at register:
➢ Entering a sales total lower than the amount actually paid
by the customer.
➢ Rather than reduce the price of an item, an employee might
record the sale of fewer items.

▪ False discount
➢ Involved employee with the authority to grant discounts.
➢ Accepts full payment for an items but records the
transaction as if the customer had been given a discount.
Understated sales
 3. Theft of cheques through email

▪ Usually occurs when a single employee is in charge of
opening the mail and recording the receipt of payments.
▪ This employee simply takes one or more of the incoming
cheques; since these checks are not logged as received, the
payment is not posted to the customer account.
▪ It appears as if the cheque to had never arrived.
 Theft of cheques through email

▪ The theft of cheques may be more difficult to conceal
a check theft.
➢ The victim company will send notices of nonpayment
to its customers.
➢ Customers are likely to complain when they receive a
second bill for a payment they have already made.
➢ The cashed cheque will serve as evidence that
customers made payments.
Theft of incoming
checks
 4. Short-term skimming


▪ Is not a distinct method for stealing sales and receivables, but
rahter a dstinct way of using skimmed money.
▪ A fraudster keeps the stolen money only for a while, before
eventually passing the payment on to the employer.
▪ Steal an incoming payment and then place the skimmed funds
in an interest-bearing account or in a short-term security.
▪ The fraudster earn interest on the skimmed payments while
funds remain under their control.
▪ Mostly this fraudster think their activity is not wrong because
stolen money are returned to the company.
Short term
skimming
 Converting stolen cheque

THREE METHODS

1. Dual endorsement
➢ Company’s endorsement at the back of
cheque only provides for the cheque to
be deposited into a company account
➢ Fraudster make a second endorsement
on the back of cheque, making the
cheque payable to themselves, an
accomplice.
➢ Eg: manager skimmed cheque and
deposited them into his own account by
signing his own name as second
endorser.
 Converting stolen cheque


2. False company accounts
▪ Cheque contain company information
▪ Real ABC company accounts is at Bank A, fraudster open an
account in the name ABC company at Bank B
▪ When the fraudster steal the cheque containing company
information, he/she can deposit them in her false ABC
company account at Bank B because same name.
 Converting stolen cheque


3. Altered payee designation
✓ More direct way
✓ Fraudster alter the cheque by add their own names to stolen
cheque or simply add new name over the existing payee
✓ This cheque may/may not pass when the fraudster want to
convert them depend on the quality of the alteration.
 How the fraudster
concealing the fraud?

1. Destroying or altering records of the transcation
➢ Destroy the store’s copy of a receipt, cash register receipt.
➢ Fabricate new tapes to match the cash on hand.
2. Concealing receivables skimming schemes
a) Lapping → crediting of one account through the abstraction of money
from another account.
b) Stolen/counterfeit statements → to keep them from complaining about
the misapplication of their payment.
3. Inventory padding
 TUTORIAL


1. What is skimming?

2. State 4 types of skimming.

3. Describe 3 methods of converting stolen

cheques.

Submit to my email nurashikin@nbuc.edu.my before 26 January 2022