Is Your Firm Facing A Fraud – Cash Fraud Schemes?

By Minerva Valuations Team

How can you tell if your firm is facing or going through a fraud, specifically, a cash fraud?

If your business accepts cash payments, which typically occur in retail and the services industry, then your firm is a higher risk for cash fraud schemes i.e. cash larceny schemes. Various surveys indicate that check tampering, skimming, payroll, and cash larceny schemes were twice as common in small organizations as in larger organizations. It appears that an external audit of the financial statements, was the most common approach, to prevent fraud taken by organizations; However, that is not, always, enough as many organizations, both big and small, face the same challenges.

We note that in the 2018 ACFE study of Fraud – Report to the Nations, the median fraud in the U.S. was $108,000, while the median fraud in Canada was $200,000; It appears that small businesses lose twice as much to larger businesses, per fraud, probably due to less internal and external controls in place. We present the median loss, by organization, suggesting that any entity, whether they are a government agency or a public company or a private entity, is subject to fraud risk.

However, it appears that private entities followed by public entities are the most common entities subject to fraud. It also appears that industry by industry, these statistics vary: the median loss in the construction industry is $227,000 whereas in the manufacturing industry it is $250,000 while in the retail industry it is $50,000.

Often to determine whether a fraud exists is, one has to determine whether an employee or a contractor has the motive, the opportunity, and the rationalization to justify the actions. In some scenarios, this is easy to do but more often this is a subjective exercise and requires in-depth analysis, of all the known facts.


Something like the scene from the accountant does occur (and only this scene) and requires in depth analysis of the general ledgers, adjusting journal entries, bank statements, cheques, e-transfer reports, wire transfers, credit card statements, etc.

High level, there are two types of cash fraud: cash larceny and skimming.

Cash Larceny: It is the intentional taking away of an employer’s cash (the term cash includes both currency and checks) without the consent and against the will of the employer.

Skimming: It is the process by which cash is removed from the entity before it enters the accounting system.



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