The most common frauds in this cycle are:1.Outright cash thefts: usually carried out through unrecorded sales, under-ringing of sales, lapping schemes, and overbilling, among others2.Theft of other assets: Assets can be stolen by ordering and shipping goods to an address other than that of the business3.Kickbacks to customers: the fraudster under-bills the customer for merchandise and they split the difference or receivables are written off as uncollectible for a fee.4.Front-end frauds: the fraudster directing customers to take their business elsewhere or misappropriating a rebateFIC 4020: Forensic Accounting and Fraud Investigation - Paula Kigen11Lapping Scheme is an accounting method that involves altering the accounts receivable section of the balance sheet when cash that is intended for the payment of a receivable is stolen. The method involves taking the first receivable collected and using that to cover the theft, while the second receivable collected is accounted to the first, the third receivable to the second, and so on.For example: assume that $100 that was to be used to pay for a receivable is stolen from ZXC Inc. The next receivable ($125) is paid to ZXC a few days later. In a lapping scheme, the first $100 of this second payment will be accounted to the first receivable account, while the remaining $25 will be put toward the second receivable.A lapping scheme may initially be a convenient way for a company to account for theft, but the firm must eventually account for the theft as a loss and deduct it from net income.FIC 4020: Forensic Accounting and Fraud Investigation - Paula Kigen12
9/6/20183This cycle includes non-capital procurementsand payments for goods, equipment, and services used in company operations.These schemes are often extremely complex and involve bank accounts, and even corporate filings for the dummy entities.Procurement fraud is mostly a collusive employee-vendor fraud. The vendor will typically provide a bribe or kickback in return.In the case of tendered contracts, the employee may rig the bidding in favour of the fraudulent vendor. Once the vendor has been awarded the contract, the cost of the bribe may be recoveredand profits increased by substituting products inferior to contract specifications, billing for work not done, shipping less than ordered, padding overhead expenses etc.FIC 4020: Forensic Accounting and Fraud Investigation - Paula Kigen13This cycle deals with hiring and termination, salaries, timekeeping, expense account reimbursements, and health and other types of employee insurance coverage.Common forms of fraud in this cycle are:1.paying ghost employees, 2.overstating hours worked, 3.overstating expenses e.g. false expense account reports4.filing false medical claims.