Darla, an accounts receivable clerk, is applying customer payments incorrectly to conceal her theft. What type of scheme is she committing?

Darla is committing a lapping scheme. In this type of fraud, an employee manipulates accounts receivable by misapplying customer payments. The intent behind lapping is typically to cover up theft by applying one customer's payment to another customer's account, thus concealing the absence of funds from the original source. This redirection creates a temporary illusion that the accounts are properly balanced, allowing the perpetrator to misappropriate funds without immediate detection.

The mechanics of lapping involve a sequential process where, after stealing a payment, the clerk uses the next customer's payment to cover the previous theft. This ongoing cycle of misapplication keeps the fraud hidden for longer periods as the accounts appear to be reconciled.

Kiting, on the other hand, involves using checks drawn on accounts that do not have sufficient funds to artificially inflate available balances, which is unrelated to the direct misapplication of payments. Substitution generally pertains to replacing legitimate expenses with fraudulent ones rather than manipulating accounts receivable. Padding typically involves inflating expenses or revenues beyond actual amounts, rather than misapplying payments. Thus, lapping is the most accurate classification of the scheme involved in Darla's actions.