What is the difference between lapping and kiting?

Lapping occurs when cash is stolen

upon receipt from one customer's account. ... Kiting occurs when funds are stolen from the
company and, to cover this theft, the employee transfers money from one bank account to
another account right before year-end.

Companies can prevent lapping by conducting regular audits of cash receipts, and by
separating cashier and billing responsibilities. The scheme can be detected by tracing how cash
receipts have been applied to customer accounts. One telltale sign of lapping is a rise in the
aging of accounts receivable.Jan 19, 2018

A lapping scheme is a fraudulent practice that involves altering accounts receivables to hide a
stolen receivables payment. The method involves taking a subsequent receivables payment and
using that to cover the cover the theft. The next receivable is then applied to the previous
unpaid receivable, and so on.
Lapping occurs when a cashier or clerk steals cash from one customer's payment and covers it
up by stealing cash from the next customer's payment ... and so on. It is easier where cash
handling and cash recording duties are handled by the same person. Also called teeming and
lading.

Lapping occurs when an employee steals cash by diverting a payment from one customer, and
then hides the theft by diverting cash from another customer to offset the receivable from the
first customer. This type of fraud can be conducted in perpetuity, since newer payments are
continually being used to pay for older debts, so that no receivable involved in the fraud ever
appears to be that old.

Lapping is most easily engaged in when just one employee is involved in all cash handling and
recordation tasks. This situation most commonly arises in a smaller business, where
a bookkeeper may be responsible for all accounting tasks.

If these tasks are split up amongst several people (known as the segregation of duties), then
lapping can only be conducted when two or more employees are involved. Lapping typically
requires that the person engaged in the fraud be involved every day, and so does not take any
vacation time. Thus, having a person refuse to take the vacation time that they have earned can
be considered a possible indicator of the existence of lapping.

Lapping can be detected by conducted a periodic review of the cash receipts records, to trace
payments to outstanding receivables. If there is ongoing evidence that cash receipts ar e
 routinely being applied against the wrong customer accounts, then either the cashier is
astonishingly incompetent or there is an active lapping scheme in progress.

Controls that can be used to prevent or detect lapping include the following:

 Have someone other than the cashier send statements to customers. Customers know what they
paid to the company, so they should be able to detect unusual payments ascribed to the ir
accounts, or note that certain payments were never applied against their accounts.
 Contact customers and ask if they have received monthly statements from the company. The
responsible party may have been intercepting and destroying the statements before they were
mailed.
 Audit cash receipts transactions on a regular basis, as noted above.
 Require all employees in the accounting area to take all of their vacation time, without
exception.
 Track the days of accounts receivable on a trend line. A gradual increase in this measurement
can be caused by lapping.
 Tightly control the use of credit memos. A party committing fraud may attempt to terminate a
lapping situation by writing off a receivable in the amount of the missing funds.
 Stamp all checks with "For Deposit Only," so that employees cannot deposit these checks to
their own accounts.
 Have customers pay directly to a lock box, so that cash cannot be intercepted and stolen by
employees