Lapping
Definition
A scheme to conceal the theft of cash from customer receipts by applying a later customer's payment to the earlier customer's account. Creates a running gap between customer accounts and cash receipts that grows unless the lapper catches up or is discovered.
- Category
- Cash receipts fraud
- Mechanism
- Rolling misapplication of later payments to earlier accounts
- Detection method
- Comparing receipt dates to deposit dates and customer statements
- Requires
- Continuous, ongoing concealment effort by the perpetrator
Common questions
Why does lapping eventually get discovered?+
The gap between recorded and actual receipts keeps growing as more accounts get shuffled, so the perpetrator must spend increasing time covering the trail. A vacation, illness, audit, or job change that interrupts the cover-up exposes the accumulated discrepancy.
How does an auditor detect lapping?+
By comparing the dates customer payments were received against the dates they were recorded and deposited, and by confirming account balances directly with customers, since the books will show a payment applied later than the customer actually made it.
Related terms
- Cash Larceny
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- Fraudulent Disbursement
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- Ghost Employee
- A fictitious or terminated worker whose record remains active on the payroll master file. Wages are disbursed under that record and diverted...
- Segregation of Duties
- The principle that the authorisation, custody, and recording of any transaction should be performed by different people. Its absence is the single...
- Skimming
- An off-book cash theft: revenue is stolen before it enters the accounting system, so no entry is ever made. Skimming is harder...