CHAPTER 13 Noncash Misappropriations

FRAUDSTERS PREFER CASH SCHEMES because they do not involve the added steps of conversion that are required for noncash-misappropriation schemes. However, organizations are more aware of the risk of losing cash and normally have stricter controls over cash than noncash assets. Noncash assets that are commonly misappropriated include inventory, supplies, equipment, and proprietary information.

Misappropriation of these types of assets is simple to do as employees in the normal course of their duties must have access to these items. The theft is easy but the concealment of the theft is difficult where there are good internal controls. Even with the best of internal controls, infrequent misappropriations may not be noticed or are accepted as normal business losses or shrinkage.

Inventory comprises large-dollar amounts in retail business and also in manufacturing concerns. Retail sales staffs require access to the merchandise inventory and employees in the manufacturing sector need access to material inventory as part of their jobs. Though not as common as cash schemes, inventory is very susceptible to theft.


There are various forms of noncash misappropriation that include misuse, abuse, unconcealed misappropriations, transfer of assets, and proprietary information. There is no direct involvement of cash at ...

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