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40 Cards in this Set
- Front
- Back
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Types of Business Organizations
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Sole - Proprietorship
Partnership Corporation |
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Sole - Proprietorship
Advantages |
Ownership of all profits
Ease of organization Freedom of action Minimum of legal restrictions Maximum personal incentive No tax on the business entity |
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Sole - Proprietorship
Disadvantages |
Unlimited liability for business debts
Limited capital resources Business ends with the death of owner |
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Partnership
Advantages |
Larger capital resources
Better credit standing More managerial talent Few legal restrictions High degree of personal incentive No tax on business entity Ease of dissolution |
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Partnership
Disadvantages |
Unlimited liability for business debt
Partnership ends with death or withdrawal of any partner Restricted transfer of business ownership |
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Corporation Advantages
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Very large capital resources
Limited liability for stockholders Ease of transfer of ownership Long or perpetual life Ease of expansion Legal entity distinct from others Some federal tax incentives |
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Corporation
Disadvantages |
Tax on business income
Expenses of incorporation Limited personal incentive possible Extensive legal restrictions and regulations |
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Badges of Fraud
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Maintaining two sets of books,
Concealment of Assets – Use of Nominees, Missing Inventory or Missing Capital Assets, Destruction of books & records, Large of frequent currency transactions, Payments to fictitious persons or companies, False or altered entries and documents, False invoices or billings, Purchase or sale of under/over valued assets, Large company loans to employees or other persons, Frequent cashing of checks received, Frequent use of cashier’s checks, Using photocopies of invoices or receipts instead of original documents, Personal expenses paid with company funds, Payee names on checks left blank & inserted at a later date, Excessive billing discounts, Excessive spoilage or defects, Double payments on billings, Unnecessary use of collection accounts, An individual negotiating checks made payable to a corporation, Second or third-party endorsements on corporate checks |
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Money Service Businesses
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Money Transmitters
Check Cashers Issuers /Sellers / Redeemers Currency Dealers / Exchangers |
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Money Transmitters
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Western Union
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Check Cashers
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Payday loan centers
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Issuers / Sellers / Redeemers
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Money Orders
Travelers Checks Stored Value Cards Pre-Paid Phones |
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Currency Dealers / Exchanges
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Airports
Metropolitan Areas |
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Money Service Business
Regulations |
4789 Currency Transaction Reports over $10,000
Maintain log over $3,000 per transaction Verify Identity of Customer Must Register with US Treasury and re-register every 2 years Must Maintain a Current List of their Agents Required to Report Suspicious Transactions to US Treasury |
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Money Service Business Locations
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Convenience stores
Drug Stores Gas Stations Grocery stores Motels Travel Agencies Truck Stops Collection Agencies Bus Stations |
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Money Service Business
Other products and Services |
Packaging / Shipping
Food Stamp Distribution Beepers Pre-paid Phones & Phone Cards Lottery Tickets Telegrams Foreign Check Collection Foreign Drafts & Deposits Mail Drops Postal Services Travel Agency Welfare Benefits Distribution Sale / purchases of Precious Coins and Precious Metal Electronic Tax Filing Electronic Bill Paying |
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Money Service Business
Registration |
Name and Location of Business
Names of Owners, Directors and Officers Bank Institutions used by business Estimate of Business Volume for each Year Maintain a State Business License |
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Two types of Brokerage Accounts
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Securities and Commodities
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Name some securities
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Stocks
Bonds Corporate Municipal U.S.Government Obligations Treasury Bills Treasury Notes Treasury Bonds |
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Name some Commodities
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Future Contracts
Exchanges |
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Point of Receipt Analysis
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Check company Sales Journal for all sales
Identify several sales to check against Cash Receipts Journal (CRJ) If CRJ is short compared to Sales Journal, check bank deposits Sales Journal shows supplies sold on 9-1-98 for $2,000 CRJ shows receipt of $750 for supplies on 9-1-98 Check deposit ticket and find $2,000 check was deposited with “less cash” of $1,250 Confront person who signed for “less cash” at bank |
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Point of Payment Analysis
What to look for accounts payable/payroll |
Fictitious payables
Ghost employee and payroll kickback schemes Overbilling Offbook and currency transactions |
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Methods of proof
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Indirect, direct
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Direct methods of proof
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Microscopic view
Special illegal financial transaction by suspect Actual proof of wrongdoing |
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Indirect Methods of Proof
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Macroscopic view
Overall financial condition of suspect Inferences to wrongdoing |
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Direct methods include _______items
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specific
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Indirect methods include
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Net Worth
Expenditures Bank Deposits |
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The Financial Profile
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Assets
Liabilities Sources of funds Expenditures |
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Disposition of income
What can you do? How Effect |
Buy assets like Investments
Real Estate, Vehicles so the Assets increase OR Pay off debt loans, mortgages, liabilities decrease |
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Net worth equation
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Assets
Minus: Liabilities Equals: Net Worth Minus: Prior Year’s Net Worth Equals: Increase in Net Worth Plus: Known expenses Equals: Total net worth increase Minus: Funds from known sources Equals: Funds from unknown sources |
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Keys to net worth analysis
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Cash-on-hand
Cash in banks Asset Valuation Known Expenses |
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Net worth -Elements of proof
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Establish reliable opening net worth
Investigate leads showing suspect’s innocence Establish likely taxable source of income with evidence of net worth increase |
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Bank deposits methods
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Prove suspect engaged in lucrative income producing business
Prove suspect made periodic deposits of funds Determine deposit not from non-taxable sources Establish unidentified deposits appeared as income |
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Bank deposits formula
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Total Deposits to all accounts
Minus: Transfers and redeposits Equals Net Deposits to all accounts Plus: Cash Expenditures **(1)(2) Equals Total receipts from all sources Minus: Funds from known sources Equals Funds from unknown sources |
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Cash expenditures formula
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Net Deposits to all accounts
Plus: Beginning bank account balance Equals Net bank funds available Minus: Ending bank account balance Equals Net bank disbursements |
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Determining CASH expenditures
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Total documented expenditures
Minus: Net bank disbursements Equals Cash expenditures |
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Expenditures method
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Establish a firm starting point
Establish likely source of income Investigate all leads showing suspect’s innocence |
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Expenditures analysis
Known expenditures |
Increase in cash on hand
Increase in cash in bank accounts Decrease in liability balances Personal living expenses |
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Expenditures analysis
Known sources of funds |
Decrease in cash on hand
Decrease in cash in bank accounts Salaries or business profits Tax refunds, interest, dividends, insurance proceeds Loans, gifts, inheritances Unemployment, Social Security or other public assistance Other known sources |
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Expenditure Analysis Formula
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Total Expenditures
Minus: Known sources of funds Equals: Funds from unknown sources |
