Tracy walks through the process of calculating a business interruption insurance claim, also called a business income loss. When a company is unable to operate for a period of time due to a covered loss (a fire, for example), its insurance policy may provide coverage that pays for lost profits while the business is closed. Tracy explains how to calculate net income plus continuing expenses in cases such as this.
Tracy talks with Miles Mason, JD, CPA about some of the common financial lies told by spouses during divorce.
When a divorce involves a business, we often ask for a copy of the general ledger, which is part of the company’s accounting records. The general ledger includes the details of transactions for a specified period of time. What can we find in the general ledger? Tracy Coenen explains in this video:
The skills of a forensic accountant can be useful in bankruptcy cases. In this video, Tracy talks about a case in which she was retained by a creditor to examine the finances of the debtor. There were allegations that the debtor concealed material facts about its financial position when it originally applied for credit, and that certain disclosures in the bankruptcy filing were fraudulent.
How prevalent is financial statement fraud in public companies? In this video, Tracy Coenen talks about the most recent COSO report on fraudulent financial reporting at U.S. public companies. The most common financial statement fraud that companies engaged in was improper revenue recognition, followed by the overstatement of asset or the improper capitalization of expenses.
What benefits do companies and their executives receive from financial statement fraud?
- The stock price goes up because the company is more profitable.
- The company’s debt rating goes up.
- The company is likely to be able to refinance its debt and therefore can reduce its interest expense. The company may also have fewer debt covenant restrictions associate with its debt.
- Executives win because they will probably get higher bonuses that are tied to the profitability of the company, and their stock options will be more valuable.
In this one minute video, Tracy explains how Ponzi schemes work. They are also called pyramid schemes because the constant recruitment of new “investors” creates the shape of a pyramid, with many new investors required at the bottom of the pyramid to pay “returns” to the earlier investors.
The hallmarks of a Ponzi scheme include:
- Promises of extraordinary returns (interest) on investment – When it sounds too good to be true, it probably is. Why on earth could you earn so much more on your money with this scheme than with a traditional investment?
- There is no actual investment strategy – You won’t know this, because they’ll make it sound like there is. The promoter will tell you about this revolutionary product or business model or investment that is going to generate all this money. But in reality, there is nothing creating returns. The promoter is only generating “returns” from new investors, and is using your money to pay off other investors and line his own pockets.
- Money from new investors is used to pay returns to earlier investors – Since there is no real business or viable investment strategy, new investors must be recruited to bring money into the scheme. The “returns” paid to earlier investors are often used as “proof” of the viability of the investment strategy when trying to recruit new victims.
- The scheme eventually collapses – It may take a long time, but eventually the pyramid scheme fails when the promoter can’t recruit enough new investors to keep the money flowing.
Are you a testifying expert or a consulting expert in a litigation matter? Is there a difference in how you should maintain your file based on your designation? Tracy Coenen gives her advice.
Attorney Miles Mason talks about the characteristics he looks for in a potential expert witness, including qualifications, ability to explain concepts, and demeanor.
Bank statements can be incredibly useful when searching for hidden income during a divorce financial analysis. Both deposits and expenditures should be evaluated, and the process is explained in this video.
What kind of work can a forensic accountant do in divorce cases? Tracy Coenen talks about the work of a CPA, including calculating income, evaluating financial disclosures, valuing assets, and completing a lifestyle analysis.