Jessica and other list members!
I am not in banking, however I did find the following regarding kiting. Hope they help!
Jim
Kiting: this is when an embezzler covers their theft by transferring money from one bank to another and improperly recording the transaction. For example, near the balance sheet date a check is drawn on one bank account, immediately deposited in a second account before the end of the accounting period. This is an attempt to have funds recorded as an asset in both accounts.
-- uses normal delays in processing financial transactions to create the appearance of assets where assets do not exist.
-- an irregularity that overstates cash by causing it to be simultaneously recorded in two or more bank accounts. Kiting is possible because a check takes several days to clear the bank on which it is drawn (float period).
Kiting may be detected by:
preparing a bank transfer schedule (kiting schedule);
preparing a four column bank reconciliation (also called a proof of cash);
obtaining a cutoff statement for all bank accounts and testing for proper cutoff of receipts and deposits.
• To test for kiting,
Bank transfers must be recorded in both the receiving and disbursing banks. If there was a transfer from one bank to another, but only the receipt is recorded in the current year, it could indicate an attempt to conceal theft.
The date of the recording of the disbursements and receipts for each transfer must be in the same fiscal year. If a disbursement is recorded (in the accounting records) in the current year and the receipt recorded in the subsequent year, it could indicate an attempt to conceal theft.
Disbursements on the bank transfer schedule should be correctly included in or excluded from year-end bank reconciliations as outstanding checks.
Receipts on the bank transfer schedule should be correctly included in or excluded from yearend bank reconciliations as deposits in transit.
Article on kiting www.nysscpa.org/cpajournal/1997/0197/depts/Auditing.htm
Detecting Check Kiting http://progressivebanks.com/losscontrol/losscontrol1a.htm
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Message posted by Jessica Wilhoite on July 15, 2002
Good Afternoon! This question is for those who work in the banking industry.
Does anyone have any ICQ's or other questionaires that pertain to procedures involving kiting situations? And what do you do when there are no documented procedures in place?
Jessica R. Wilhoite
Audit Specialist
First Columbia
Bank & Trust Co.
11 West Main St.
Bloomsburg, PA
17815
Phone: (570) 387-4610
Email:
[EMAIL PROTECTED]
Website:
www.firstcolumbiabank.com
