NonCash Assets

1
Chapter 9

• Non-Cash Assets

2
Inventory and All Other Assets
Larceny
Misuse
Asset Req. Transfers
False Sales Shipping
Purchasing Receiving
Unconcealed Larceny
3
Non-Cash Misappropriations

• Misuse
• Unconcealed larceny
• Asset requisitions and transfers
• Purchasing and receiving schemes
• Fraudulent shipments

4
Misuse of Non-Cash Assets

• Typical misuse
• Doing personal work on company time
• Running side businesses

5
The Costs of Inventory Misuse

• productivity
• additional employees
• Lost business
• wear and tear

6
Unconcealed Larceny Schemes

• not complex
• Some employees know their co-workers are stealing
  
• highly trusted
• Assets misappropriated after-hours or mail to
  themselves

7
The Fake Sale

• accomplice
• Sale is not rung up but the accomplice takes the
  merchandise
• return merchandise for cash

8
Preventing and Detecting Larceny of Non-Cash
Assets

• Segregate the duties
• Maintain physical security
• access logs
• Install security cameras

9
Preventing and Detecting Larceny of Non-Cash
Assets

• inventory counts
• Investigate significant discrepancies
• customer complaints

10
Asset Requisitions and Transfers

• non-cash assets to be moved from one location to
  another
• Internal documents are used
• requisition materials to complete a work-related
  project but steals the materials
• multiple locations

11
Purchasing and Receiving Schemes

• Assets were intentionally purchased by the
  company but misappropriated
• Falsifying incoming shipments

12
False Shipments of Inventory and Other Assets

• False shipping documents and false sales
  documents
• False packing slips
• false sale is created
• Receivable is aged and written off
• Legitimate sale is understated

13
Other Schemes

• Assets are written off
• Assets are declared as scrap
• New equipment is ordered for the company to
  replace old

14
Concealing Inventory Shrinkage

• What is Inventory Shrinkage?
• What detects Inventory Shrinkage?

15
Concealing Inventory Shrinkage

• Altered inventory records
• Fictitious sales and accounts receivable

16
Concealing Inventory Shrinkage

• Write off inventory and other assets
• Physical padding

17
Preventing and Detecting Non-Cash Thefts
Concealed by Fraudulent Support

• Segregation of Duties
• Match the invoices to receiving reports before
  payments are issued
• Match the packing slip to an approved purchase
  order

18
Preventing and Detecting Non-Cash Thefts
Concealed by Fraudulent Support

• Match outgoing shipments to the sales order
  before the merchandise goes out
• Periodically match inventory shipments to sales
  records
• Investigate shipments that cannot be traced to a
  sale
• Check out unexplained increases in bad debt
  expense

19
Preventing and Detecting Non-Cash Thefts
Concealed by Fraudulent Support

• Compare shipping addresses to employee addresses
• Review unexplained entries in perpetual inventory
  records
• Reconcile materials ordered for specific projects
  with actual work done
• Perform trend analysis on scrap inventory
• Check to make sure that inventory removed from
  inventory is properly approved