Common Fraud Schemes by Bookkeepers

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In small organizations, bookkeepers have wide access to a company's cash. They can control which vendors get paid, and they may maintain records of who has paid the company. The ability of a bookkeeper to steal from an organization is directly related to the bookkeeper's authority. The more access the bookkeeper has, the more ways he can steal. In many cases, the solution to bookkeeper fraud is to hire additional accounting personnel and limit the authority of any one person. Accountants who work in the anti-fraud arena refer to this as the segregation of duties.

Stealing Cash

  • In businesses where a bookkeeper handles deposits and reviews cash register receipts, she may be able to steal cash. She may be the last person to handle cash before it is deposited. The theft may not be discovered if nobody matches cash register receipts to bank deposits. The bookkeeper can cover this up if she can write petty cash receipts or claim that payments were made in cash.

Skimming Schemes

  • Bookkeepers can skim cash or checks from a company. One common skimming operation is known as a lapping scheme. A bookkeeper may, for example, steal a check made payable to his employer from a regular customer. The bookkeeper can conceal this theft by using later payments to cover the stolen payment. Employers may never discover these schemes unless they conduct outside confirmations with customers. Other skimming schemes include phony expense reimbursements and creating fake refunds.

Fraudulent Disbursements

  • If a bookkeeper can pay vendors and approve invoices, his ability to steal from a company is greatly expanded. The bookkeeper can approve invoices for phony companies. The bookkeeper can overstate expenses in the company's journal, paying vendors the true amount and stealing the difference. Bookkeepers may even be capable of creating ghost employees and stealing a paycheck.

Inventory

  • If a bookkeeper is required to conduct inventory at a business, he may be able to conceal thefts of company property. A bookkeeper can also create fictitious customers and approve credit for these companies, shipping goods for which the employer will never receive payment. It will simply be recorded as bad debt.

References

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