From crumbs to corporate collapse, the way fraudsters cook the books has changed little, although the ingredients have become far from immaterial, warns Emile Woolf
Although I have forgotten most of my own auditing experiences, a few still stand out.
A client company that was in business as a confectionary retailer sold cakes over the counter, either whole or in weighed-out portions. The principal internal control was reconciling the weight of cakes leaving the bakery with the weight of portions sold, which was always a shade less. Cutting cakes into slices leaves crumbs, and the difference in weight was loosely termed ‘crummage’.
Reconciliations were meticulously recorded and there was a ‘crummage control account’ (CCA) in the nominal ledger, to which each day’s monetary equivalent of crummage loss was debited.
To the audit team this was a mere curiosity. The trifling sums in question fell so far below our ‘materiality’ threshold that we never paid any attention to crummage when conducting audits.
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