The auditor of a bank is called to a meeting with a senior operations manager because of a customer’s report that an auto loan payment was not credited. According to the customer, the payment was made at a teller’s window using a check drawn on an account in that bank. The payment was made on its due date. May 5. On May 10, the customer decided to sell the car and called the bank for a payoff on the loan. The payment had not been credited to the loan. The customer came to the bank on May 12 to inquire about the payment and meet with the manager. The manager found that the payment had been credited the night before the meeting (as of May 11); the customer was satisfied because no late charge would have been assessed until May 15. The man¬ ager asked if the auditor was comfortable with this situation.

The auditor located the customer’s paid check in the deposit department and found that it had cleared as of May 5. The auditor traced the item back through the computer records and found that the teller had processed the check as being cashed. The auditor traced the payment through the entry records of May 11 and found that the payment had been made with cash instead of a check.

Required What type of embezzlement scheme does this appear to be, and how does that scheme operate?