Mistake v. Fraud This assignment aligns with Outcome 5: Examine the role of the forensic accountant as litigation support in expert testimony. Lindsay Smith is a doctor who has owned her own practice for ten years. The practice is successful and sees several new clients each month. With the practice’s anticipated growth, Lindsay hired an in-house bookkeeper in year two. The bookkeeper has been responsible for the daily, monthly, and annual accounting transactions. The subsequent financial statements are then sent to a local accounting firm for annual tax preparation. Lindsay believed she could charge all expenses to one credit card and they would be categorized into the correct expense accounts. She failed to communicate with her bookkeeper that a large number of personal expenses, including her car payment, personal grocery trips, meals, and family vacations were included on the credit card. Her bookkeeper, under the assumption all credit card charges were related to business activities, coded the credit card payments as general business expense. Additionally, the tax preparer relied on the financial statement information without paying closer attention to the general ledger. Consequently, the practice’s prior year tax returns reflect an incorrect picture of the practice’s financial position. The issue has unsurfaced with the possibility of a new doctor joining the practice as a partner. While preparing a compilation of financial statements for the potential partner’s review, the accounting firm inquired into the nature of the general business expense account. Lindsay must provide accurate financial statements to the potential new partner as part of the partnership agreement. Identify each of the balance sheet and profit loss statement accounts that could be affected by this oversight. What effect does this oversight have on net income and why is it significant? Distinguish fraudulent activity from mistakes or incompetence. At what point has this, or would this, scenario become fraud? How can each person in this scenario react so that this does not happen again? As a forensic accountant, you have been requested to provide your expertise as an expert witness in a court case supporting a new doctor looking to join the practice. Consider the ethical challenges you may face. Your well-written paper must be 3-4 pages, in addition to title and reference pages. Include document and citation formatting per CSU Global Writing Center guidelines. Cite at least two-peer-reviewed sources, in addition to the required reading for the module.
Mistake v. Fraud
This assignment aligns with Outcome 5: Examine the role of the forensic accountant as litigation support in expert testimony.
Lindsay Smith is a doctor who has owned her own practice for ten years. The practice is successful and sees several new clients each month. With the practice’s anticipated growth, Lindsay hired an in-house bookkeeper in year two. The bookkeeper has been responsible for the daily, monthly, and annual accounting transactions. The subsequent financial statements are then sent to a local accounting firm for annual tax preparation. Lindsay believed she could charge all expenses to one credit card and they would be categorized into the correct expense accounts. She failed to communicate with her bookkeeper that a large number of personal expenses, including her car payment, personal grocery trips, meals, and family vacations were included on the credit card. Her bookkeeper, under the assumption all credit card charges were related to business activities, coded the credit card payments as general business expense. Additionally, the tax preparer relied on the financial statement information without paying closer attention to the general ledger. Consequently, the practice’s prior year tax returns reflect an incorrect picture of the practice’s financial position.
The issue has unsurfaced with the possibility of a new doctor joining the practice as a partner. While preparing a compilation of financial statements for the potential partner’s review, the accounting firm inquired into the nature of the general business expense account. Lindsay must provide accurate financial statements to the potential new partner as part of the
- Identify each of the
balance sheet andprofit loss statement accounts that could be affected by this oversight. - What effect does this oversight have on net income and why is it significant?
- Distinguish fraudulent activity from mistakes or incompetence. At what point has this, or would this, scenario become fraud?
- How can each person in this scenario react so that this does not happen again?
- As a forensic accountant, you have been requested to provide your expertise as an expert witness in a court case supporting a new doctor looking to join the practice. Consider the ethical challenges you may face.
Your well-written paper must be 3-4 pages, in addition to title and reference pages. Include document and citation formatting per CSU Global Writing Center guidelines. Cite at least two-peer-reviewed sources, in addition to the required reading for the module.
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