Grey, a controller for a small company, took a large sum of money from the company deposits and concealed the theft. The money had already been recorded in the accounting system. This scheme is best classified as which?

• A. Illegal gratuities scheme
• B. Skimming scheme
• C. Fraudulent financial statement scheme
• D. Cash larceny scheme

Answer: (D)

This scenario tests the distinction between cash larceny and other cash-related frauds. Cash larceny occurs when someone steals cash that the organization has already recorded in its books—taking money that is in the company’s possession after the receipts have been recorded, and then concealing the theft. Here, Grey took a large sum from company deposits and hid the theft, and importantly the money had already been recorded in the accounting system. That alignment—the cash being stolen after it has been recorded—fits cash larceny best.

Skimming would involve stealing cash before it is recorded, which isn’t the case here. Fraudulent financial statement schemes involve altering the financial statements to mislead readers, not just stealing cash after it’s recorded. Illegal gratuities relate to bribes, not theft of cash.