Chapter 3
Review Questions
3-1 (Learning objective 3-1) What is cash larceny?
Answer: Cash larceny involves the intentional taking away of an employer’s cash without the
consent, and against the will, of the employer. Cash larceny schemes involve the theft of money
that has already appeared on the victim company’s books.
3-2 (Learning objective 3-2) How do cash larceny schemes differ from fraudulent disbursements?
Answer: Cash larceny schemes generally target receipts, not disbursements. Furthermore,
larceny schemes usually involve the physical misappropriation of cash by the perpetrator. The
method of extraction—for instance, a perpetrator putting cash in his pocket—is itself improper.
Fraudulent disbursements, on the other hand, typically rely on the submission of phony
m
documents or the forging of signatures in order to make a fraudulent distribution of funds
er as
appear to be legitimate. The manner by which funds are disbursed is the same as in any
co
eH w
legitimate disbursement, but the purpose of the distribution is fraudulent.
o.
3-3 rs e
(Learning objective 3-3) What is the difference between cash larceny and skimming?
ou urc
Answer: Both cash larceny and cash skimming schemes involve theft of the victim company’s
funds. However, cash larceny involves the removal of money after it has been recorded in the
o
company’s books, whereas skimming involves the removal of cash before the funds appear on the
aC s
books. In other words, cash larceny is an on-book fraud, whereas skimming is an off-book fraud.
vi y re
3-4 (Learning objective 3-4) Where do cash larceny schemes rank among cash misappropriations
in terms of frequency? In terms of median loss?
ed d
ar stu
Answer: In the 2009 Global Fraud Survey, cash larceny schemes were less common than both
skimming and fraudulent disbursements schemes. This is to be expected, as cash larceny is an
on-book form of fraud that leaves an imbalance on the victim organization’s books. This makes
is
cash larceny more difficult to conceal than other forms of cash misappropriation. The median
Th
loss for cash larceny schemes was greater than that for skimming schemes, but lower than that
for fraudulent disbursements schemes.
sh
This study source was downloaded by 100000823518935 from CourseHero.com on 08-16-2021 21:05:50 GMT -05:00
https://www.coursehero.com/file/6892235/Ch3/
, 3-5 (Learning objective 3-5) What are the main weaknesses in an internal control system that
permit fraudsters the opportunity to commit cash larceny schemes?
Answer: Cash larceny schemes can take place under any circumstances in which an employee
has access to cash; therefore, regular supervision and surveillance controls may prevent the
opportunity for theft to occur. The lack of, or inadequate, separation of duties for receiving,
recording, depositing, and disbursing cash permit cash larceny schemes to occur.
3-6 (Learning objective 3-6) What are the five methods discussed in this chapter that are used to
conceal cash larceny that occurs at the point of sale? Explain how each works.
Answer: In the cash larceny schemes reviewed, there were five methods that were identified as
being used to conceal larceny at the point of sale. The first was thefts from other registers, in
which an employee steals cash from another person’s cash register. This does not conceal the
m
crime, but it may help conceal the perpetrator’s identity. The second method was death by a
er as
thousand cuts, in which an employee repeatedly steals very small amounts of cash over an
co
eH w
extended period of time, hoping that the thefts are small enough to avoid triggering an
o.
investigation. The third method is the use of reversing transactions. After the perpetrator has
rs e
stolen cash, he processes fraudulent refunds or voids sales in order to bring sales records back
ou urc
into balance with cash on hand. The fourth method is to alter cash counts or cash register tapes.
Totals are misreported to create a fictitious balance between cash on hand and sales. The fifth
o
method is to destroy sales records, which makes it difficult for the victim organization to discover
aC s
an imbalance caused by larceny.
vi y re
3-7 (Learning objective 3-8) How do employees commit cash larceny of incoming receivables?
How are the schemes concealed?
ed d
ar stu
Answer: Fraudsters may post the customer’s payment to the accounting system but steal the
cash, which causes an imbalance in the cash account. This imbalance can be concealed if the
perpetrator has control over the recording function for ledger accounts. The fraudster makes
is
unsubstantiated entries, which produce fictitious balances. Other ways to conceal cash larceny
Th
include using reversing transactions, creating unauthorized discounts, charging the theft to bad
debts, or adjusting the inventory account. Alternately, the perpetrator simply may destroy all
records of the transaction.
sh
This study source was downloaded by 100000823518935 from CourseHero.com on 08-16-2021 21:05:50 GMT -05:00
https://www.coursehero.com/file/6892235/Ch3/
Review Questions
3-1 (Learning objective 3-1) What is cash larceny?
Answer: Cash larceny involves the intentional taking away of an employer’s cash without the
consent, and against the will, of the employer. Cash larceny schemes involve the theft of money
that has already appeared on the victim company’s books.
3-2 (Learning objective 3-2) How do cash larceny schemes differ from fraudulent disbursements?
Answer: Cash larceny schemes generally target receipts, not disbursements. Furthermore,
larceny schemes usually involve the physical misappropriation of cash by the perpetrator. The
method of extraction—for instance, a perpetrator putting cash in his pocket—is itself improper.
Fraudulent disbursements, on the other hand, typically rely on the submission of phony
m
documents or the forging of signatures in order to make a fraudulent distribution of funds
er as
appear to be legitimate. The manner by which funds are disbursed is the same as in any
co
eH w
legitimate disbursement, but the purpose of the distribution is fraudulent.
o.
3-3 rs e
(Learning objective 3-3) What is the difference between cash larceny and skimming?
ou urc
Answer: Both cash larceny and cash skimming schemes involve theft of the victim company’s
funds. However, cash larceny involves the removal of money after it has been recorded in the
o
company’s books, whereas skimming involves the removal of cash before the funds appear on the
aC s
books. In other words, cash larceny is an on-book fraud, whereas skimming is an off-book fraud.
vi y re
3-4 (Learning objective 3-4) Where do cash larceny schemes rank among cash misappropriations
in terms of frequency? In terms of median loss?
ed d
ar stu
Answer: In the 2009 Global Fraud Survey, cash larceny schemes were less common than both
skimming and fraudulent disbursements schemes. This is to be expected, as cash larceny is an
on-book form of fraud that leaves an imbalance on the victim organization’s books. This makes
is
cash larceny more difficult to conceal than other forms of cash misappropriation. The median
Th
loss for cash larceny schemes was greater than that for skimming schemes, but lower than that
for fraudulent disbursements schemes.
sh
This study source was downloaded by 100000823518935 from CourseHero.com on 08-16-2021 21:05:50 GMT -05:00
https://www.coursehero.com/file/6892235/Ch3/
, 3-5 (Learning objective 3-5) What are the main weaknesses in an internal control system that
permit fraudsters the opportunity to commit cash larceny schemes?
Answer: Cash larceny schemes can take place under any circumstances in which an employee
has access to cash; therefore, regular supervision and surveillance controls may prevent the
opportunity for theft to occur. The lack of, or inadequate, separation of duties for receiving,
recording, depositing, and disbursing cash permit cash larceny schemes to occur.
3-6 (Learning objective 3-6) What are the five methods discussed in this chapter that are used to
conceal cash larceny that occurs at the point of sale? Explain how each works.
Answer: In the cash larceny schemes reviewed, there were five methods that were identified as
being used to conceal larceny at the point of sale. The first was thefts from other registers, in
which an employee steals cash from another person’s cash register. This does not conceal the
m
crime, but it may help conceal the perpetrator’s identity. The second method was death by a
er as
thousand cuts, in which an employee repeatedly steals very small amounts of cash over an
co
eH w
extended period of time, hoping that the thefts are small enough to avoid triggering an
o.
investigation. The third method is the use of reversing transactions. After the perpetrator has
rs e
stolen cash, he processes fraudulent refunds or voids sales in order to bring sales records back
ou urc
into balance with cash on hand. The fourth method is to alter cash counts or cash register tapes.
Totals are misreported to create a fictitious balance between cash on hand and sales. The fifth
o
method is to destroy sales records, which makes it difficult for the victim organization to discover
aC s
an imbalance caused by larceny.
vi y re
3-7 (Learning objective 3-8) How do employees commit cash larceny of incoming receivables?
How are the schemes concealed?
ed d
ar stu
Answer: Fraudsters may post the customer’s payment to the accounting system but steal the
cash, which causes an imbalance in the cash account. This imbalance can be concealed if the
perpetrator has control over the recording function for ledger accounts. The fraudster makes
is
unsubstantiated entries, which produce fictitious balances. Other ways to conceal cash larceny
Th
include using reversing transactions, creating unauthorized discounts, charging the theft to bad
debts, or adjusting the inventory account. Alternately, the perpetrator simply may destroy all
records of the transaction.
sh
This study source was downloaded by 100000823518935 from CourseHero.com on 08-16-2021 21:05:50 GMT -05:00
https://www.coursehero.com/file/6892235/Ch3/
