6. Management can bleed the Company perpetually short of No apparent controls Require all payments, perks, or company or engage in cash to prevent one owner transactions to an owner to be approved length transactions with owners. Expense accounts and perks from defrauding the by the other owner. Both owners are paying their unusually high other owner. spouses exorbitant salaries and have An external, independent extravagant expense accounts and Inflated salary expenses Full disclosure of all payments, perks, or perks. Abnormally high prices for the transactions to a qualified tax assets purchased. preparer to ensure full compliance with Buildings, equipment, and applicable tax laws. furnishings could be purchased from/by the owners at inflated or deflated prices. This is not fraud, as long as what occurs is reported properly for tax purposes and financial statement given to the bank properly disclose any needed items. It is fraud if one owner authorizes payments, perks, or non-arms transactions to himself or his family that the other partner is not aware of. 7. Customers can use photo Increase in the number of sittings Photographers are not Set up automatic withdrawals from checking coupons without completing their per current customer. required to verify if accounts or automatic charges to credit payments. There are no controls to customers are current prevent customers who have stopped Coupons submitted for customers before a sitting. Require photographers to verify that customers paying on their note from taking that have been written off. are current before each sitting. their coupon to their photographer Customer given all for a sitting and getting their picture Photographer complaints. their coupons at initial Keep a list of customer payments; do not pay taken. purchase. for customers that are no longer current.
6. Management can bleed the company or engage in transactions with owners. Both owners are paying their spouses exorbitant salaries and have extravagant expense accounts and perks. Buildings, equipment, and furnishings could be purchased from/by the owners at inflated or deflated prices. This is not fraud, as long as what occurs is reported properly for tax purposes and financial statement given to the bank properly disclose any needed items. It is fraud if one owner authorizes payments, perks, or non-arms length transactions to himself or his family that the other partner is not aware of. Company perpetually short of cash Expense accounts and perks unusually high Inflated salary expenses Abnormally high prices for the assets purchased. No apparent controls to prevent one owner from defrauding the other owner. Require all payments, perks, or transactions to an owner to be approved by the other owner. An external, independent Full disclosure of all payments, perks, or transactions to a qualified tax preparer to ensure full compliance with applicable tax laws. 7. Customers can use photo coupons without completing their payments. There are no controls to prevent customers who have stopped paying on their note from taking their coupon to their photographer for a sitting and getting their picture taken. Increase in the number of sittings per current customer. Coupons submitted for customers that have been written off. Photographer complaints. Photographers are not required to verify if customers are current before a sitting. Customer given all their coupons at initial purchase. Set up automatic withdrawals from checking accounts or automatic charges to credit Require photographers to verify that customers are current before each sitting. Keep a list of customer payments; do not pay for customers that are no longer current.
rais12_SM_CH05.docx