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This illustration is known as the Fraud Tree and depicts various ways an employee can misappropriate assets. Notice there are three main ways employees can embezzle cash: skimming, larceny, and fraudulent disbursements. Pick one of the boxes under Cash and explain how an employee would embezzle money under this scheme. What internal controls can management put into place to prevent this type of embezzlement?

Skimming!!!

An employer, employee, or even someone higher up in a business may embezzle money, goods, or even services by taking advantage of the situation. Cash skimming is the simplest form of embezzlement, and it is most conducted by businesspeople and professionals alike. To better demonstrate cache skimming, it is taken as an example. It is always the junior clerks at the store that sell necklaces who, instead of claiming the necklaces, keep them in their pockets without telling their employers. There is a term for this known as white-collar crime, and it mainly occurs at the lower levels of employee mangement. The term defamation is also commonly used to describe cash skimming (myaccoutingcourse.com, n.d).

Due to this, cash skimming scams aren't included in accounting systems since they typically occur before they're recorded. Fraud involving direct cash access and government agencies are more likely to occur. The most common type of embezzlement is direct cash theft, direct access to an ATM card, or online banking. This type of embezzlement is largely used because it is very unlikely to be detected and does not leave behind an audit trail or audit proof (corporatefinanceinstiute.com, 2020).

Cash skimming can take a variety of forms, which can be explained below along with the internal controls that can be used to minimize it. The skimming of sales receipts and the failure to record them in the accounting system is known as defalcation. Defalcation can be further divided into unrecorded, which means the transaction is completely removed, and understandable transactions, which are recorded at a low amount than the actual. It is possible to prevent this by monitoring inventory levels constantly and tally the sales that correspond to the amount received. Decreasing inventory without increasing the corresponding sales is considered an act of tampering with sales (cpahalltalk.com, 2021).