Due to the business having such high risk liabilities it needs to be an entity in and of itself which is what this type of incorporation will allow. The process is quite simple to be incorporated; the proper paper work must be filled with the secretary of state where the business is established. When a business is incorporated as a C-corporation it becomes an entity of itself and no longer is financially tied to the owner/s. The client was very concerned about the many liabilities that the company could possibly face. As a C-corporation the business, not the owner, would be held liable for any financial damages.
When considering how Small Fries Inc and its other facilities should record the costs associated with OSHA compliance on their financial statements as either capitalized as an asset or charged to expenses. We should consider the types of repairs that will be done. Whether they are ordinary repairs or major and extraordinary repairs that will benefit the companies more than one year or operating cycle. According to ASC 360 -10- 25- 5 Planned Major Maintenance Activities, The use of the accrue-in-advance (accrual) method of accounting for planned major maintenance activities is prohibited in annual and interim financial reporting periods. GAAP defines a company's assets as the things it owns or controls that have measurable future economic
An individual is able to use his/her legal name for the business or come up with a different name as long as he/she files a d.b.a. for the name. (Lau, T, & Johnson, L., 2011) The below points of interests are of value in helping with a decision: • Liability – as a sole proprietor that individual is libel for all business expenses as well as coming up with the capital to start the business. This can be difficult if the business starts to fail since the creditors will be able to come after the individuals personal expenses to cover the debts (Smith, 2011). • Income Taxes – being a sole proprietor gives the individual the option to file taxes under a separate employer identification number.
GAAP also has specific types of transactions, and it required public companies to follow rules that are set by the Securities and Exchange Commission. IFRS Revenue Recognition IFRS revenue recognition states that revenue can be recorded when it becomes economically significant: IFRS revenue recognition can be defined as "not as strict" as opposed to GAAP. IFRS is considered universal; standard 18 sets forth general principles and examples applicable to all industries. IFRS allows recognition when the rewards and risk of ownership is transferred, giving the buyer control of the goods, revenue is understood and the economic benefits will flow to companies or in other words, you will get paid. IFRS bans the "completed contract method" and under certain circumstances will allow the percentage of completion method.
Case 1.12 3. A “peer review” is an examination of an accounting firm’s quality control system and its compliance with the requirements of that system by one or more accounting professionals. Because Friehling & Horowitz’s audits of Madoff Securities were, in fact,” “sham audits”, then a thorough peer review would have revealed that those audits were false and misleading. The resulting peer review report filed with the relevant regulatory or oversight body would very likely have resulted in Friehling & Horowitz Being disqualified as Madoff’s audit firm. 4 Three conditions that are usually present when financial fraud occurs is the fraud risk triangle, the existence of an incentive and/or pressure to commit a fraud, the opportunity to commit a fraud is present (typically due to ineffective internal controls), and the ability to rationalize fraudulent conduct on the part of the given or potential fraudster.
As people as a whole have proven time and time again, there are rules and laws and there are people whom break those rules and laws for personal gain. As long as people choose to be dishonest and unethical in their businesses and personal choices when it comes to finances, there will be financial fraud and investors will suffer financial
One huge internal control concern with LJB Company is violation of the segregation of duties internal control principle. The accountant should not serve as Treasurer and Controller. The same employee should not be responsible for related activities and record keeping should be separate from physical custody of the asset. By having the accountant order, pay and receive supplies increases the risk for fraud because they handle related purchasing activities. They can easily use fraud to authorize payment for a false invoice.
Jill Karnick should have performed an inventory roll forward given the several red flags HMI carried during the audit period. The red flags included the SEC’s inquiry regarding HMI’s allowance for doubtful accounts, the premature press release reporting the company’s 1995 earnings, the anonymous letter that BDO Seidman received, and the suspicious in-transit inventory at year-end. All those incidents together are very suspicious and can possibly put a material effect to the financial statement, so Jill Karnick should perform all necessary substantive procedures to validate the inventory account balance. According to AU Section 312A.1, “Audit risk and materiality […] need to be considered together in determining
The cheating management is providing fake accounts and incurring inherent internal audit risks, however, it is the external auditors’ responsibility to remain a critical and suspicious thinking over these accounts and investigate any further misrepresentations in the publicly released financial statement. The audit team should also include more auditors in their discussion of the suspicious accounts and come to an integral and practical measure to dig deeper into the target company’s financial
Your personal assets are not subject to claims of the corporation’s creditors, only your investments in the corporation are subject to any claims. As for the $25,000 because it is directly related to expense paid upfront by your business and taxation has already occurred not tax liability should be assessed to this amount. For tax purposes