When the IRS believes a taxpayer has unreported income, they will use alternative methods to attempt to determine the true income. One of those methods is the Expenditures Method. Tracy Coenen explains the basic methodology in this video. Note that this method of calculating income can be used in a variety of cases that involve allegations of hidden income including divorce, money laundering, and income tax fraud.
If you were searching for financial statement fraud, what would you look for? Tracy talks about some of the basic/common signs you might see if Tracy Coenen teaches about some basic signs of financial statement fraud.
Every second of every day millions of humans and machines use the internet for both personal and business transactions via thousands of websites. Sadly, even with advanced security, there are those who try to fraudulently obtain other peoples hard earned cash or even their identities.
Being aware of the type of scams happening on the net and the tell-tale signs can help individuals and organizations prevent becoming cybercrime or scam victims.
As the saying goes, forewarned is forearmed and the number of people now taking up careers as CPAs (Certified Public Accountants) has dramatically increased as businesses are more aware than ever of their need to have auditing and investigative accounting as a security measure. This article ‘43 of the most commonly asked questions about CPAs’ highlights the role of a CPA in more detail.
Below are 3 of the most common money scams of 2018 to give an overview of what you should be paying attention to if you want to avoid being a money scam victim. Read More
Defendants in criminal cases such as tax fraud, money laundering, or embezzlement often need forensic accountants to help evaluate complex financial situations. Should you provide expert witness services to criminal defendants? Tracy discusses the work and some of the issues that should be considered.
A while back we talked about behavioral red flags of fraud, which are the signs that someone might be involved in a fraud at work. Some of the most common red flags are living a lifestyle that exceeds a person’s earnings and unusual attitudes on the job (being combative, possessive of their work, etc.)
The same red flags don’t necessarily apply to upper-level executives, or they’re just not as easy to spot. In this video, Tracy talks about some of the warning signs we might see with top executives who are committing fraud. Most commonly, we see a higher level of greed and arrogance when committing fraud (which, coincidentally, may lead to the person’s downfall).
It is important to know that money laundering is not a fraud scheme. It is a crime that is committed to cover up other crimes, but it is not the same thing as fraud. The primary purpose of money laundering is to take money that has been received from criminal activities (dirty money) and make it appear legitimate (clean money).
Dirty money can come from illegal activities such as drug dealing, prostitution, robbery, bribery, illegal political contributions, tax evasion, or fraud. The laundering process hides the real origin of the money and makes it look like it came from a legitimate source. Read More
When a business owner has a cash business and is getting divorced, sometimes the income coincidentally (or not so coincidentally!) drops dramatically.
What can we do to investigate that? It’s hard. The business owner knows that cash leaves no paper trail and is difficult to prove.
But all is not lost. There are techniques we can use to find indirect proof of the amount of cash a business should be generating (even if the owner isn’t reporting all of it). Read More
There are many signs of fraud occurring within companies or with individuals. What are some of the signs we may see that indicate fraud is occurring? During a fraud investigation I am looking for signs that things are wrong. What clues may exist that things are not as they seem? Are there deceptions or misdirections that seem unusual that an honest person wouldn’t engage in? Are things set up in a way such that the environment is ripe for fraud to occur?
Apparent Control Weaknesses
When readily apparent major deficiencies in a company’s control procedures are identified, they should be considered warning signs that fraud could be occurring. All companies have some things that are not as secure as they should be. However, when the controls over a company’s assets and data are severely deficient, that is cause for alarm.
Some of the most common characteristics that might be considered severe deficiencies include: Read More
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.
Financial statement fraud happens is one of the most costly types of fraud. It is a significant problem because people inside and outside the company rely on the information provided in the financial statements. They assess the financial results and make predictions and decisions about the future of the company based on those results.
Upper management or company owners are the ones who are usually responsible for financial statement fraud. Executives are entrusted with entire companies. They have access to nearly all data and employees, and they can exploit this access to commit and conceal fraud.
The power the executive has by virtue of her or his position in the company is closely linked with the high cost of financial statement fraud. Power and access within a company make it possible for larger frauds to be committed and covered up. Read More