1.Discuss what lapping means. What procedures can auditors employ for its detection?
2.What is a cutoff bank statement? How are they used by auditors?
3.What is check kiting? How might auditors detect kiting?
Please see the responses to your questions.
1. .Discuss what lapping means. What procedures can auditors employ for its detection?
Lapping does not actually involve the misappropriation of funds but is a fraud that may be committed by an employee to conceal a misappropriation of funds, usually funds paid by a customer of the employer. The employee conceals the misappropriation by applying funds subsequently paid by a second customer to conceal the deficiency in the first customer's account. However, this means that the accounting records would show an amount owing by the second customer that had in fact been paid. The employee then uses funds paid by a third customer to conceal the deficiency in the second customer's ...
This solution provides the learner with a basic understanding of the term lapping and describes procedures that can be utilized for its detection. Further, this solution explains the cutoff bank statement and check kiting and how each can be detected by auditors.