Teeming and Lading - what do these two terms mean?

Good old fashioned term, so as an old fashioned accountant and ex internal auditor thought I'd have a go.

It is a way of fraudulently borrowing by falsifying entries in the accounts, so teeming and lading is not theft, but is false accounting. It is usually with money, but can be through any commodity (I have seen it done with paint and with tarmac).

The way it works with money - if the perpetrator, who normally dealswith receiving and recording income, needs to get their hands on cash for some reason, can, when some one pays the business by cash, pocket the cash rather than record it. But, the payer might require a receipt as the payment is in cash, and the debt will still be recorded in the books and may be noticed as outstanding (a statement being sent out or a reminder letter is the last thing the perpetrator wants).

To get around the receipt issue, the perpetrator may also be receiving cheques for which a receipt does not have to be issued, so the unreceipted cheques would be matched to the receipts issued. (In serious cases I have seen cheques of certain values systematically held back to match with any cash that may be received in the future, any receipts issued will not indicate payment method).

The only way to stop the fact that a paid debt is still outstaning and is to put the cash back, but to do that may require the borrowing of more cash! Again in an extreme case I have seen records kept by the perpetrator to record where the cash is borrowed and where records have false entries, that are as complexed as the organisations cash records. In this case, when the whole fraud went wrong and we discovered it, we had no way of knowing which recorded debts had actually been paid. (An alert to this fraud was raised as a result of third party circularisation of debtors followed up by bank slip testing, but the full extent of the fraud was discovered as a result of the perpetrator owning up)

With paint, a workman was given an internal works order for a painting job, this gave authority to draw paint from stores. This paint was used for a private job. To get paint to carry out the works order, paint was drawn from another works order and so on. The workman tried to put the records straight by thining the paint and applying less coats than specified (this fraud was discovered during a bonus scheme audit).

To combat it:
Ensure cashiers take holidays (the fraud will go horribly wrong if they are absent for more than a day or two);
Keep postal remittances away from cashiers (to reduce the number of cheques available);
Isuue receipts for all income;
Require that receipts show method of payment;
Sent out reminders and statements regularly.

The audit techniques which may pick up teeming and lading are:
Checking the above things are happening;
Write to debtors directly asking if they owe the money (debtor circularisation);
Bank slip testing (hated by Cashiers and auditors alike. so tends to be used when already on alert) - this involves intercepting the cashiers banking before it leaves the building but after they have cashed up for the day. Then comparing the cheques against the the debt details. You are looking for: differences in the dates on the cheque and receipt, the payers name being different to the debtors, the cheque being part payment topped up with cash or another cheque. Bank slip testing never proves teeming or lading but does raise suspicions.