In the context of fraud, what does lapping involve?

Lapping is a form of fraud that particularly involves the manipulation of accounts receivable by misappropriating cash receipts. This typically occurs when an employee takes payments made by customers and either does not record them or applies them to other accounts in order to conceal the theft. By covering up the missing cash through the use of payments from other customers, the perpetrator creates a cycle where new incoming funds can be used to cover the previous thefts, which is essentially a form of transferring funds while concealing cash disbursements.

In this scenario, the correct answer highlights the mechanism of lapping, as it revolves around managing and obscuring cash flows in a way that prevents detection of the initial theft. Understanding this helps to grasp the complexity and different techniques involved in committing fraud, particularly in relation to cash management and financial reporting.