Fraud Tales: Fraud Investigation Finds Stolen Cash in Business

Cognizant of the rampant escalation of fraud in the business world, the owner of a mid-sized retail establishment took great care in establishing fraud deterrence measures to protect the company.  With more than 80 percent of the company’s sales paid in cash, multiple checks and balances were put into place to make sure each day’s receipts, cash register tapes, bank deposit slip and bank receipt all matched.  And still, the accounting manager was able to steal $400,000 from the company.  This second Tale of Fraud in an ongoing series recounts an actual fraud investigation that revealed exactly how the fraud was perpetrated.

“The fraud deterrence measures seemed foolproof to the business owner,” said David Anderson, principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation and fraud deterrence programs in the Delaware  Valley.  “But owners need to realize that the people handling their money are in a unique position to identify loopholes in the system and, given the opportunity, to exploit them.”

Anderson said the fraud deterrence measures set up by the company required cashiers to manually record each sale on a numbered receipt from multi-copy receipt books and also to ring up the sale on the cash register.  At day’s end, the cashiers totaled the register drawers and matched them to the register tapes.  The accounting manager then recounted each drawer and rematched it to the tape.  She gave the cash, checks and credit card receipts, along with the corresponding numbered manual receipts, to the accounting clerk for entry into the computer system.  The accounting clerk prepared the deposit slip, and the controller took deposit slip and receipts to the bank.  The accounting clerk then verified that the amount on the printed bank deposit receipt matched the amount on the original deposit slip.

“By having multiple people involved in the process and having receipts and deposits checked multiple times, the owner couldn’t envision a scenario in which anyone would have been able to steal a penny,” said Anderson, a Certified Fraud Examiner who recommends that every organization enact a comprehensive fraud deterrence program created by an experienced firm that provides forensic accounting services in Philadelphia and the Delaware Valley.  “A forensic accounting expert would have offered a different opinion.”

The fraud investigation Anderson performed found that the genesis of the fraud was in the numbered receipt books, which used only four-digit receipt numbers.  Because the business had thousands of transactions each year, the same four-digit receipt numbers were used multiple times.  There was no delineated plan for providing specific receipt books to the cashiers or for tracking numbered receipts, meaning the same receipt book might be used by multiple cashiers during a year.

The fraud investigation also found that although the register tapes were matched to the drawer contents each day, there was no requirement that the tapes be retained or that the bank deposit total match the register tape total.

These weaknesses in the fraud deterrence measures were the catalyst for the accounting manager’s illicit activity, Anderson said.  First, she discarded the register tapes each day so that no one could go back and match them to the bank deposit.

Then, according to the fraud investigation, she destroyed some of the handwritten cash receipts and pocketed the amount of cash they represented. The remaining receipts were given to the accounting clerk to enter into the accounting system.  As a result, the remaining cash, checks and credit cards matched the remaining handwritten receipts, as well as the amount deposited into the bank, Anderson explained.

“There was no reason to suspect the accounting manager of being anything but loyal, reliable and diligent,” Anderson said.  “Except, of course, that she was in that very special position of being intimately involved in the accounting procedures and therefore able to exploit the weaknesses in them.  A comprehensive fraud deterrence program developed by a forensic accounting expert would have helped close the loopholes and prevent the loss of $400,000.”

If you suspect your anti-fraud controls may have weaknesses, consider contacting a Certified Fraud Examiner from an experienced firm that provides forensic accounting services in Philadelphia and the Delaware Valley.  A Certified Fraud Examiner can examine your fraud deterrence measures and make recommendations for improving them, Anderson said.

This Tale of Fraud article is the second in a series of occasional posts that will analyze actual cases of fraud that occurred in businesses, non-profits or government offices.

If you require the services of a Certified Fraud Examiner or any other forensic accounting services in Philadelphia and the Delaware Valley, please contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at

About David Anderson & Associates

David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley.  The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, fraud deterrence, litigation support, economic damage analysis, business consulting and outsourced CFO services.  Company principal David Anderson is a forensic accounting expert who has more than 30 years of experience in financial and operational leadership positions and is a Certified Public Accountant, a Certified Fraud Examiner and a Certified Valuation Analyst.