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Chapter 9 PowerPoint PPT Presentation

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Chapter 9. Non-Cash Assets. Inventory and All Other Assets. Misuse. Larceny. Asset Req. & Transfers. False Sales & Shipping. Purchasing & Receiving. Unconcealed Larceny. Non-Cash Misappropriations. Misuse Unconcealed larceny Asset requisitions and transfers

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Chapter 9

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Chapter 9

Non-Cash Assets

Inventory and All

Other Assets



Asset Req. &


False Sales

& Shipping

Purchasing &




Non-Cash Misappropriations

  • Misuse

  • Unconcealed larceny

  • Asset requisitions and transfers

  • Purchasing and receiving schemes

  • Fraudulent shipments

Misuse of Non-Cash Assets

  • Typical misuse

  • Doing personal work on company time

  • Running side businesses

The Costs of Inventory Misuse

  • productivity

  • additional employees

  • Lost business

  • wear and tear

Unconcealed Larceny Schemes

  • not complex

  • Some employees know their co-workers are stealing

  • highly trusted

  • Assets misappropriated after-hours or mail to themselves

The Fake Sale

  • accomplice

  • Sale is not rung up but the accomplice takes the merchandise

  • return merchandise for cash

Preventing and Detecting Larceny of Non-Cash Assets

  • Segregate the duties

  • Maintain physical security

  • access logs

  • Install security cameras

Preventing and Detecting Larceny of Non-Cash Assets

  • inventory counts

  • Investigate significant discrepancies

  • customer complaints

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

Purchasing and Receiving Schemes

  • Assets were intentionally purchased by the company but misappropriated

  • Falsifying incoming shipments

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

Other Schemes

  • Assets are written off

  • Assets are declared as scrap

  • New equipment is ordered for the company to replace old

Concealing Inventory Shrinkage

What is Inventory Shrinkage?

What detects Inventory Shrinkage?

Concealing Inventory Shrinkage

  • Altered inventory records

  • Fictitious sales and accounts receivable

Concealing Inventory Shrinkage

  • Write off inventory and other assets

  • Physical padding

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

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

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

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