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Fraud Investigation Case Study
A lesson in depositing student fees
A private school billed students monthly and routinely deposited all cash received each day. A sharp-eyed accounting manager contacted us when he noticed that the accounts receivable clerk had made only two deposits, both lump sums, in the previous month.
Our investigation started without involving the clerk. We were granted access to the accounting system and, under the guise of an audit, our team analyzed:
a) The aggregate balances of income and receivables, which showed that recorded cash receipts decreased when accounts receivable decreased. This confirmed our initial theory that cash was being skimmed.
b) Invoicing records, which showed a high number of voided or deleted invoices. We were able to locate unexplained gaps in invoice numbers among the students' monthly bills.
c) The accounting system's hardware and files, which were evaluated using data mining and electronic evidence procedures. We were able to prove that some invoices had existed at one time and had been deleted by someone who had obtained the accounting department manager user access rights.
d) The manual records, kept by the accounts receivable clerk, which should have corresponded to the electronic records. We then uncovered the discrepancies between cash received and cash recorded.
The accounts receivable clerk was interviewed and shortly admitted to borrowing the cash and forgetting to return it. The extent of the theft was about $30,000 over a period of six months.
Although the culprit attempted to muddy the waters of the cash receipts and confuse the accounting manager, with one phone call to Buchbinder Tunick, the manager received the help he needed to see through the deception.
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