doc 10.docx - Chapter 9 Non cash assets • Occupational frauds in which employees misuse or steal inventory supplies equipment and other non-cash

doc 10.docx - Chapter 9 Non cash assets • Occupational...

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Chapter 9: Non cash assets Occupational frauds in which employees misuse or steal inventory, supplies, equipment and other non-cash company assets. By far, physical assets, including inventory and equipment, were the most commonly misappropriated noncash asset in the ACFE study. Fraudsters embezzled physical assets in 75 percent of the cases involving noncash misappropriations Although securities were the least likely asset to be misappropriated (20 cases), the median loss in cases involving securities theft was significantly higher than in any other category, at $330,000 Noncash tangible asset misappropriations
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Categories of misappropriations: o Misuse o Unconcealed larceny o Asset requisitions and transfers o Purchasing and receiving schemes o Fraudulent shipments Misuse of noncash tangible assets Misused or borrowed Typical misuse o Company vehicles o Company supplies o Computers o Other office equipment Doing personal work on company time (computers,, supplies, office equipment) Running side businesses-if competing with their employer then it is a conflict of interest too o using emplouer’s equipiment to compete The categories ACFE researchers have developed for classifying fraud are helpful in that they allow examiners to track certain types of schemes, noting common elements, victims, methods, and so on; but those involved in fraud prevention should remember that every crime will not fall neatly into one category. Frauds often expand as opportunity and need allow; a scheme that begins small may grow into a massive crime that can cripple a business. The costs of inventory misuse Difficult to quantify-viewed as a borrowing by perpetrator-not always a harmless crime o When a perpetrator borrows a stapler for the night or takes home some tools to perform a household repair, the cost to his company is negligible, as long as the assets are returned unharmed Loss of productivity o costly – side business Need to hire additional employees to compensate Lost business if employee’s business competes Unauthorized use of equipment can mean additional wear and tear sooner or more often When employee borrows equipment, there is no guarantee that he/she will bring it back Unconcealed larceny schemes The means employed to steal noncash assets range from simple larceny—just walking off with company property—to more complicated schemes involving the falsification of company documents and ledgers. Occurs when an employee takes property from the company premises without attempting to conceal it in the books and records:
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Most noncash larceny schemes are not very complicated. They are typically com- mitted by employees (such as warehouse personnel, inventory clerks, and shipping clerks) who have access to inventory and other assets.
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