A bookkeeper working for a small building supply store business, stole over $30,000 over four years according to this news report.
Having never worked in retail, I am not sure exactly how this fraud works. Based on the article, I assume the bookkeeper reported a fraudulent return of merchandise in the accounting system and then paid her credit cards for the amount of the return. Where I’ve worked, we used return authorization numbers assigned to every return of material. The return material report was reviewed at least monthly by upper management. Perhaps in retail there are too many returns to be reviewed but there must be some report to check for this type of fraud. The article doesn’t state how she was caught so I can only guess that the owner was suspicious or was tipped off.
$30,000 of returns over four years is $7,500 per year and $625 per month. Without knowing the revenue of the business, it is hard to say if the years with the fraudulent returns were higher than in previous years. The bookkeeper’s fraudulent returns would have been in excess of the normal customer returns and would have been a red flag to the owner. In the financial statements, returns are coded to a Return and Allowance account. One bookkeeping trick is to bury the returns in the Revenue account so they are not as noticeable as they are when they are reported on their own line.
Let me know if you have any insight into this type of bookkeeping fraud.