Colleen Matthews had just turned 22 when her hard work finally started to pay off. Six months
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Within a few days on her new job, Colleen had adapted to her new environment. Colleen and two other recent graduates were running the entire accounting department. However, it wasn’t long until Colleen began to notice that something wasn’t right. After a few weeks, Colleen realized that the firm’s executives were participating in illegal transactions. The company executives were importing expensive technological products from China and selling them under the table to contacts unknown to Colleen. Once the firm received the products at the shipping dock, the executives’ “personal employees” marked the products and took them to a separate location. The entire operation was done with little paperwork. The money received from the special products received special attention. Colleen was told to report this inflow of cash in an account called “Personal Executive Consulting Services.” This allowed the executives to personally use the money at their convenience.
1. Does Colleen have a responsibility to report the apparent fraud?
2. If so, to whom should she report the fraud?
3. Assuming that the fraud has been continuing for several years, what would be the tax ramifications to the executives of not reporting earnings on their tax returns?
4. Even though the money is from illegal sources, are the executives required to report the income on their annual tax returns?
5. Earlier in the book, we discussed the net worth method. How do you think the net worth method can help prosecutors determine the extent of these executives’ illegal income?
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Related Book For
Fraud examination
ISBN: 978-0538470841
4th edition
Authors: Steve Albrecht, Chad Albrecht, Conan Albrecht, Mark zimbelma
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