2. Definiton Lapping
• Lapping occurs when an employee alters accounts receivable records in order
to hide the theft of cash. Where the perpetrator hiding the theft by
transferring cash from other customers to offset the receivable from the first
customer
3. Where does Lapping Occur
• Lapping is most easily engaged in when just one employee is involved in all
cash handling and recordation tasks. This situation often occurs in small
businesses where only one bookkeeper is responsible for all accounting tasks.
If these tasks are split up amongst several people (known as the segregation
of duties), then lapping can only be conducted when two or more employees
are involved.
4. Detect Lapping
• A periodic check of the cash receipts records can be used to identify trace
payment to outstanding receivables. If there is persistent proof that cash
receipts are frequently applied to the erroneous customer accounts, either the
cashier is egregiously inept or there is an ongoing lapping scam. People who
don't want to take a vacation may be accused of lapping since the perpetrator
often has to be involved every day and cannot take any time off.
5. Controls Against lapping
• Have someone other than the cashier send statement to customers.
• Contact customers and ask if they have received monthly statement from the company.
• Audit cash receipts transactions on a regular basis, as noted above.
• Require all employees in the accounting area to take all of their vacation time, without exception.
• Track the days of accounts receivable on a trend line because gradual increase in measurement can be caused
by lapping.
• Tightly control the use of credit memos.
• Stamp all checks with ‘‘For Deposit Only” so that employees cannot deposit these checks to their own
accounts.
• Have customers pay directly to a lock box
