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Kiting

Meaning: 

Kiting is defined as a fraudulent scheme whereby individuals exploit the time lag between cheque deposits and their clearance to utilize non-existent funds in bank accounts. This practice is considered a form of bank fraud and is illegal under financial regulations.

Importance:

Kiting is crucial in financial audits and fraud detection, as it can indicate deeper issues within financial practices and controls.
Awareness of kiting is vital for maintaining the integrity of financial institutions and protecting against fraudulent activities.


How to understand kiting :

Kiting undermines the trust in banking systems and can lead to serious legal consequences for those involved.
flag during financial examinations.
It is essential for auditors and financial professionals to recognize kiting as a significant red flag during financial examinations.


Types of Kiting:  

Cheque Kiting:
Involves writing cheques from one account to another without sufficient funds to cover them.

Credit Card Kiting:
Utilizing credit card payment processing times to exploit available credit.

Stock Kiting:

A rare form that involves manipulating stock transactions to create the illusion of funds.

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