Analyzing Skimming

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AUGUST 2007 - The June article “Skimming: The Achilles’ Heel of the Audit?” was interesting in concept, if not wrong in application. To a hammer, every situation looks like a nail. To a forensic accountant, every situation can be interpreted as fraud, theft, embezzlement, skimming, etc. As someone who has never written a check at the grocery store, drycleaner, or gas station, and almost never pays cash, hopefully I won't be accused of skimming. Or if I was, hopefully I would be alive to explain the benefits of credit cards that provide frequent-flier miles, or the convenience of debit cards.

Past that, as someone who has owned laundromats, this almost certainly is not a case of skimming. Skimming would be more likely had the bags of coins described in the article consisted of standard issue U.S. quarters, which could have been removed from the laundromat’s machines prior to counting and recording. As these were rare coins, chances are they were not the size or weight that a coin-operated machine in a laundromat would accept. That meant they would have had to have come through the cash register.

Had Janet been working the register and noticed these rare coins, she might have substituted current coins or currency for them in order to keep the register balance static. The article doesn’t seem to indicate that any register balances appeared to have been tinkered with; nor were there excessive unexplained charges against the register. Janet might still be accountable to Raymond (her partner in the laundromat) for not sharing in the rare coins, but this would be harder to prove absent the skimming angle. The idea that she skimmed would add circumstantial credence to thinking that the rare coins were skimmed also, even though virtually physically not possible.

It wasn’t stated in the article, but I assume that Janet was under suspicion of skimming for two main reasons. First, that all cash-business owners are assumed to skim. Second, because Raymond had told the forensic accountant they were skimming. Otherwise, a CPA who is trained in skepticism should not look merely at the absence of a check written to a drycleaner, gas station, or grocer as evidence of skimming.

Jeffry R. Haber, PhD, CPA
Hagan School of Business, Iona College
New Rochelle, N.Y.

The author responds:

I appreciate that the letter writer has written few checks. That alone would not be indicative of skimming. The one fallacy in the writer’s argument is the presumption that coins were counted and recorded; it wasn’t the case here. Indeed, besides bank deposits there were no records to speak of. This matter was heard in a court of law where a verdict was reached. Inexperienced “forensic accountants” frequently cannot resist the temptation to try opining on the sufficiency of evidence. That is not their job and no competent judge would allow it.

Joseph T. Wells, CFE, CPA
Austin, Texas


Accounting Is Much More Than Numbers

Talking with CPA Journal Editor-in-Chief Mary-Jo Kranacher at the NYSSCPA’s and Foundation for Accounting Education’s Antifraud Conference in June, I faulted the literacy level of current accounting graduates because they do not read and cannot write.

Certainly, being a CPA has always been much more than numbers. It is particularly interesting to note how far the profession has come in attempting to give clarity to financial statements via the footnotes. When I worked for a major accounting firm in the 1960s, the ability to comply with disclosure requirements while saying nothing was a prized quality. That game is over. The reader of the financial statements is supposed to be enlightened by the footnotes, which requires a literate accountant. Let us use the extra year of education that will soon be mandated to achieve that goal.

Martin Leventhal, CPA
Rosen Seymour Shapss Martin & Company LLP
New York, N.Y.


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



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