BUS FPX 4068 Assessment 4 Specialized Fraud Areas

BUS FPX 4068 Assessment 4 Specialized Fraud Areas

Student Name

Capella University

BUS-FPX4068 Contemporary Auditing Using Investigative Accounting Practices

Prof. Name:

Date

Case 1: How Ralph Should Handle the Situation

Ralph should have a conversation with Lisa to discuss the potential consequences of tax evasion and fraud. It is crucial that he emphasizes the importance of adhering to IRS regulations, advising Lisa to disclose her foreign trust and the related income. If Lisa agrees to comply after this discussion, Ralph should not end their professional relationship. However, if Lisa refuses to comply, Ralph may need to consider ending his consulting services for her and her company. If Lisa does not report her trust or income to the IRS, Ralph may need to seek legal counsel to understand the ethical implications of possibly reporting the attempted tax evasion (Hopwood, Leiner, & Young, 2012).

Case 2: Forensic Accounting Investigation for Christina

To begin the forensic investigation, Rick, the forensic accountant, should focus on reviewing Jose’s federal tax returns, as Jose has been uncooperative in disclosing his assets. By analyzing W-2 forms, various 1040 forms, and deduction records, Rick may be able to uncover hidden assets or income. Following this, it is important to review bank statements and loan applications. However, it may be difficult to access information on foreign trusts or accounts within the U.S. If Jose has assets hidden in foreign trusts, conventional methods of investigation might not be sufficient (Hopwood, Leiner, & Young, 2012).

BUS FPX 4068 Assessment 4 Specialized Fraud Areas

If Jose owns an undisclosed property in Mexico, detecting it will depend on whether he obtained the property through legitimate means using his social security number or through unofficial channels. If the purchase was made with cash or through informal channels, discovering the property may be very difficult. Evidence such as cash flow records, public sale records, or recent tax filings could help reveal the existence of the property (Hopwood, Leiner, & Young, 2012).

Case 3: Valuation of the Duplex Apartment Building

Valuing the duplex apartment building requires a careful consideration of the fair market value, which refers to the price the property would sell for in an open market with motivated and informed buyers and sellers (Hopwood, Leiner, & Young, 2012). The neighbor’s offer of $1.3 million serves as a reasonable reference for the property’s value, even though Mark is reluctant to sell. This offer provides a fair estimate of the property’s market value, despite any emotional attachment Mark may have. According to Generally Accepted Accounting Principles (GAAP), it is important to use caution to avoid overestimating the value of assets. In real estate valuation, market value generally takes precedence over historical cost, which aligns with GAAP principles (Hopwood, Leiner, & Young, 2012; Bertsch, 2013).

Case 4: Litigation vs. Alternative Dispute Resolution (ADR)

From Williams’s perspective, ADR is the preferred method because it is cost-effective, private, and faster. ADR can reduce the financial and reputational risks to her company. Additionally, it helps preserve the business relationship, which could be beneficial for future collaborations (Hopwood, Leiner, & Young, 2012).

On the other hand, Dunn may prefer litigation to set a precedent, holding Williams accountable for the quality issue. While ADR saves time and money, litigation would provide a clear verdict, which could favor Dunn and compel Williams to cover the damages (Hopwood, Leiner, & Young, 2012).

Preferred ADR Method

Med-arb, a hybrid of mediation and arbitration, is the preferred ADR method for both companies. This approach allows for mediation to resolve the dispute first, and if unsuccessful, arbitration can be used as a fallback. This non-traditional method helps reduce redundancy and time, making it an effective solution for both parties (Hopwood, Leiner, & Young, 2012).

References

Bertsch, L. (July 1, 2013). GAAP: Generally accepted accounting principles. Larry L. Bertsch, CPA & Associates. Retrieved June 18, 2022, from https://llbcpa.com/gaapgenerally-accepted-accounting-principles/

BUS FPX 4068 Assessment 4 Specialized Fraud Areas

Hopwood, W. S., Leiner, J. J., & Young, G. R. (2012). Forensic accounting and fraud examination (2nd ed.). McGraw-Hill.