Chapter 6: Register Disbursement Schemes

1. Chapter 6: Register Disbursement Schemes

2. What Are Register Disbursements? • Form of fraudulent disbursement • Cash stolen from cash register • Perpetrator enters a reversing transaction to justify the disbursement of funds • Register is balanced

3. Register Disbursements • Register disbursements made up only 3% of fraudulent disbursement cases. • 20 register disbursement cases were reported, with a median loss of $22,500.

4. Fraudulent Register Disbursements Two Principle Schemes: • False refunds • False voids

5. Register Disbursements – Breakdown of Cases Only 20 register disbursement cases were reported in the 1993 study. They were almost evenly split between fraudulent voids and refunds.

6. Register Disbursements -Median Losses • The median cost for fraudulent voids was more than twice that of fraudulent refund schemes. • Overall, the median cost of a register disbursement scheme was $22,500.

7. False Refunds • Fictitious refunds • No merchandise actually returned • Results in overstated inventory • Overstated refunds • Overstate a legitimaterefund, skim excess

8. False Refunds Credit card refunds • Credit refunds to accomplice account • Accomplice kicks back portion of the refund • Perp credits refund to his own account

9. False Voids • Perp makes sale, keeps customer’s receipt • After customer gone, uses receipt to process false void • May need manager approval • Forge signature • Manager “rubber stamps” voids • Perp pockets money

10. False Refunds/Voids When you have a false refund or void, what is happening in the Inventory Account?

11. Concealing Register Disbursements • Multiple disbursements below review level • Destroy transaction records • Rely on company: nobody looking for fraud

12. Register Disbursements – Countermeasures • Periodically run trend analysis, look for employees who process too many reversals • Look for refunds/voids in recurring amounts, especially round numbers • Look for excessive refunds/voids just below review levels • Encourage customers to examine their receipts – if you don’t get one, it’s free!

13. Register Disbursements – Countermeasures • Verify transactions by making random “customer satisfaction” calls to customers who have returned merchandise • Be alert for multiple refunds for the same merchandise • Look for refunds/voids with no corresponding sale

14. Register Disbursement Controls • Require management approval for all refunds/voids • Maintain management presence at cash registers • Restrict access to control key that authorizes reversing entries • Cashiers should not be allowed to reverse their own sales

15. Register Disbursement Controls • Maintain file on all voids/refunds • Require separate log-in code for every cashier • Require copy of customer receipt with all reversals • Someone independent of cashiers should prepare register count sheets

16. Register Disbursement Controls • Observe Inventory • Run perpetual inventory if possible