Check kiting is the illegal process of writing a check off of a bank account with inadequate funds to cover that check. Check kiting relies on the fact that it takes banks a few days (or even longer for international checks) to determine that a check is bad.
How do you spot check kiting?
What to look for:
- A high number of deposits-usually several per day.
- A high percentage of deposited funds coming from accounts under common control of the suspected kiter.
- Checks in float many times greater than closing bank balances.
- More “real” money is being taken out than put in.
What is check kiting How might auditors detect kiting?
The auditor can detect this form of kiting by ensuring any outstanding deposit appearing on a bank reconciliation at balance date that arises from an inter-entity cheque (in the example, the deposit from A of 60) is also recorded by the paying entity as a cheque drawn prior to balance date (and not, as shown above, as …
How is kiting carried out?
Carried out within the banking system, kiting typically involves passing a series of checks at two or more banking institutions, using accounts that have insufficient funds. Before that check clears, they then withdraw the funds from the second bank account and deposits the funds back into the first.
Does check kiting still happen?
Check kiting is illegal in many countries. However, most countries do not have a float system and checks are not paid until they are cleared, so check kiting is impossible.
How does cash kiting work?
Kiting is commonly defined as intentionally writing a check for a value greater than the account balance from an account in one bank, then writing a check from another account in another bank, also with non-sufficient funds, with the second check serving to cover the non-existent funds from the first account.
