Skimming, a very common fraud scheme, is the removal of cash from a victim prior to its entry in the accounting system. Employees who skim from their employer steal sales, donations, or receivables before they are recorded in the accounting records. Skimming schemes generally fall into one of four categories:

1. Unrecorded sales or donations
2. Understated sales, donations, and receivables
3. Theft of checks through the mail
4. Short-term skimming

There are a variety of controls that organizations should have in place to prevent employee skimming. Consider the following:

1. Is the accounts receivable bookkeeper restricted from: Preparing the bank deposit? Obtaining access to the cash receipts book? Having access to collections from customers?

2. Is the mail opened by someone independent of the cashier, accounts receivable bookkeeper, or other accounting employees who may initiate or post journal entries?

3. Is the delivery of unopened business mail prohibited to employees having access to the accounting records?

4. Does the employee who opens the mail: Place restrictive endorsements (”For Deposit Only”) on all checks received? Prepare a list of the money, checks, and other receipts? Forward all remittances to the person responsible for preparing and making the daily bank deposit? Forward the total of all remittances to the person responsible for comparing it to the authenticated deposit ticket and amount recorded? 

5. Does the organization receive cash? If yes: Are cash receipts prenumbered? Is an independent check of prenumbered receipts done daily and reconciled to cash collections?

6. Are cash receipts deposited intact daily?

7. Are areas where physical handling of cash takes place reasonably safe guarded?

8. Is the person making postings to the general ledger independent of the cash receipts and accounts receivable functions?

9. Does a person independent of the cashier or accounts receivable functions handle related complaints?

Take a look at your own controls over cash, and determine if you have implemented adequate procedures to protect your organization from skimming schemes.

Jessica Puckett, CPA, CFE