Asset misappropriation encompasses fraud schemes where an employee steals or misuses an organization’s resources. These schemes are broadly categorized into Cash Receipt Schemes (occurring before a transaction is recorded) and Cash Disbursement Schemes (occurring after funds are recorded on the balance sheet).
  ┌────────────────────────────────────────────────────────┐
  │               CASH SCHEME FRAUD LIFECYCLE              │
  └───────────────────────────┬────────────────────────────┘
                              ▼
  ┌────────────────────────────────────────────────────────┐
  │   SKIMMING SCHEMES ──► Cash diverted before ledger log │
  │                        Intercepting cash at point of   │
  │                        sale prior to register entry    │
  │   LARCENY SCHEMES  ──► Cash stolen after ledger log    │
  │                        Manipulating accounts receivable│
  │                        via fraudulent credit memos     │
  └────────────────────────────────────────────────────────┘

Skimming Investigations
Skimming is an unrecorded cash scheme where an employee intercepts funds before they are entered into the organization’s accounting systems. To detect skimming, internal auditors perform substantive reconciliation tests, comparing physical inventory usage logs directly against cash register receipt timelines. If inventory balances decrease while recorded revenues remain flat, it indicates that merchandise is being sold without being logged in the sales system.
Larceny and Lapping Investigations
Cash larceny involves the theft of an organization’s cash after it has been recorded in the financial ledgers. A common method used to conceal larceny is Lapping, where an employee steals a payment from Customer A and conceals the shortfall by applying a subsequent payment from Customer B to Customer A’s account. This creates a continuous chain of delayed postings across accounts receivable.
Auditors identify lapping by extracting customer remittance advices and executing automated date-sequence matching scripts. These scripts flag any systematic variations between the customer’s actual payment date and the internal ledger posting timestamp.
 
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