Larry’s Laws of Larceny- Law 18: Two Signatures on a Check may be no Better Than one Posted on Decemb

Larry Beebe, CPA

Many organizations have a requirement that any check drawn for more than a certain amount must be signed by two people. The assumption is that two signatures are better than one. If each person signing the checks takes their responsibility seriously, and examines the supporting documentation for each check, then two signatures are better than one. The fictitious scenario in the next paragraph shows how two signatures could be worse than one.

Rotten Rodney has had it with […]

Larry’s Laws of Larceny- Law 13: Collusion is Hard to Catch and to Prove

Larry Beebe, CPA

The American Heritage Dictionary defines collusion as “a secret agreement between two or more parties for a fraudulent, illegal, or deceitful purpose.” In an employee benefit fund, certain people in the organization have the responsibility of handling the income receipts of employer contributions. Other individuals are responsible for maintaining the accounting records of the plan. For example, an account receivable clerk is responsible for posting employer contributions to the accounting records.

When a person responsible for handling plan […]

Larry’s Laws of Larceny- Law 12: Petty Cash Sometimes Isn’t

Larry Beebe, CPA

How much time is the external auditor of the financial statements going to devote to the audit of petty cash? The auditor probably will not spend any time on petty cash because it is not a material item in the plan’s financial statements. Plan auditors spend most of their audit time in five major areas- investments, benefits, contributions, expenses, and participant data.

There is one exception. Transactions in petty cash can be indicators of fraud and, as such, […]

Larry’s Laws of Larceny- Law 10: Investment Income Disappears if you Don’t Account for it

Larry Beebe, CPA

Entities have internal control systems that insure that investments owned by the organization are properly accounted for. Often the internal controls over the income of those investments is lacking.

During the audit of a pension fund, we examined whether the income on a $5,000,000 bond with a 9% interest rate had been received. We found that one of the semi-annual $225,000 interest payments was missing. When we tracked down the missing payment we found that it was being […]

Larry’s Laws of Larceny- Law 9: The Executive Chef Isn’t Into Cooking the Books

Larry Beebe, CPA

What does “cooking the books” mean?

Investopedia defines “cook the books” as “a buzzword performed by corporations in order to falsify their financial statements.” Examples include accelerating revenues and delaying expenses. A pension fund could make its year look better by holding open cash receipts until after year end to record receipts as income that should be recorded in the following year.

I once audited a business that showed a high cash balance at their December 31 year end. […]

Larry’s Laws of Larceny- Law 7: The Petty Thief Always Gets Greedy

Larry Beebe, CPA

Most people who steal money start with small amounts. They rationalize by saying that they are only borrowing the money and they intend to pay it back. When they aren’t caught they rationalize that the entity they are stealing from didn’t even miss the money so it is okay to take more. They often think that, after all, they are entitled to the money either because they are underpaid or for other reasons.

In one situation a CPA […]

Larry’s Laws of Larceny- Law 6: You Can’t Always Tell a Phony Document by its Looks

Larry Beebe, CPA

When is a check real and when is it a phony? Sophisticated copying and printing techniques can create fake documents that can fool the experts.

A plan employee, check in hand, goes inside a liquor store to cash his paycheck. A man outside the store offers him $100 to “borrow” his paycheck. Within minutes the crook has a perfect duplicate of the check. On Saturday morning the crooks, armed with phony copies of the checks, attempt to cash […]