Last editedNov 20202 min read
For accounting departments, fraud is a genuine concern, and one form of fraud that accountants should keep a close eye on is teeming and lading. Explore everything you need to know, starting with our explanation of the meaning of teeming and lading in accounts.
What is the meaning of teeming and lading in accounts?
Teeming and lading is a term that describes a practice whereby organisations attempt to hide a cash loss in one customer’s account by moving in money from another customer’s account. It is sometimes referred to as lapping, short banking, or delayed accounting. Essentially, teeming and lading is a strategy that delays a payment deficit from showing up on a customer’s account by moving money around. Hence, older payments appear to have been covered before customers, or other organisation members might notice any disparity.
Is teeming and lading illegal?
Teeming and lading is a type of accounting fraud – although it is not classified as theft – and consequently, it is illegal. It may be picked up by regulatory bodies or internal members of the organisation. Furthermore, teeming and lading is likely to be identified in a company audit. This can have serious consequences both for the individuals involved and the organisation as a whole, which may have vicarious liability for failing to safeguard customer accounts.
Why does teeming and lading happen?
Most often, teeming and lading is a strategy used by employees who have used a customer’s money for personal purposes to cover their tracks. It may also be used by an employee that has used one customer’s money for another customer’s benefit. In both examples, teeming and lading helps keep the activity from being found out by delaying a deficit from showing up in the books and manipulating the company accounts.
How do you identify teeming and lading in auditing?
The methods for identifying teeming and lading often depend on whether individuals or organisations are already under suspicion. Some methods are more exhaustive than others – both for the auditor and those being audited – but can make it easier to catch any illicit activity.
One straightforward way of identifying potential teeming and lading activity is to contact debtors directly to verify the information in your records and flag any potential fraud. Another way to check for any accounting fraud is to implement bank slip testing, which involves checking cheques and debt details at the end of the working day to identify any potential red flags.
It’s worth noting that the most common form of teeming and lading is in relation to money and accounts, but the practice can actually take place with any asset or property.
How do you prevent teeming and lading?
When an individual is practicing teeming and lading, it often requires ongoing manipulation and movement. As such, rotating staff is one common way of avoiding teeming and lading. Not only does this make it harder for the process to take place, but it also makes it more likely that someone else will notice the disparity in the accounts.
Other potential strategies include issuing receipts, which can make it easier to track and prove any payments, as well as sending out regular statements so that customers may flag any apparent discrepancies in their accounts.
What are some examples of teeming and lading?
Teeming and lading is most often associated with accountants/bookkeepers or bank cashiers because of their direct involvement with customer accounts. However, there have been examples of teeming and lading in other professions, such as the 2015 case of a solicitor discovered by the Solicitors Regulation Authority to be teeming and lading.
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