Forensic Accounting Chapter 6

6 forensic accounting 29 the jerardo case the

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Unformatted text preview: es. unknown The financial information obtained by Phoenix The Police Department Steven Jerardo’s income will be used to reconstruct his income with: will he Expenditure Method he Net Worth Method he Bank Deposit Method Chapter 6 Forensic Accounting 30 Indirect Method #3 Source and Application of Source Funds Method or or The Expenditure The Approach Approach Chapter 6 Forensic Accounting 31 Source and Application of Funds Source Method The Expenditure Approach Approach ’s Jim e r it o ng a Thev The Format nti F ou First list the applicationscc A of funds sic l Subtract the en sources* Subtract r oCash on hand oo beginning of the (* Including F (* T at the year) year) This technique shows increases and This decreases in a taxpayer’s accounts at the end of the year. end If the applications exceed known cash If receipts Chapter 6 Forensic Accounting 32 Steven J. Jerardo Steven Expenditure Analysis Analysis January 1, 2003 – July 31, 2004 Expenditures Analysis Steven Jerardo Chandler, AZ Refer To Handout 2003 Total Expenditures Less: Total Known Sources $740,198 $262,836 $626,360 Forensic Accounting $655,679 $113,838 Funds From an Unknown Source Chapter 6 2004 $392,843 33 Steven J. Jerardo Steven Expenditure Method Analysis Expenditure Begins With Begins Subpoena: Information Obtained By Information Obtained By Subpoena: • • • • • Credit Card Transactions Phone Records & Internet Service Provider Bank Account Information Mortgage and Loan Information Employment History & Wages Information Obtained From Public Records : • Real EstateTransactions • Court Records - Arrest, Litigation, Divorce, Court Bankruptcy Bankruptcy Information Obtained From FinCEN : • Activity Reported ForensicBanks & Casinos by Accounting Chapter 6 34 Steven J. Jerardo Steven Expenditure Analysis Analysis Financial Profile January 1, 2003 – July 31, 2004 Expenditures 2003 Expenditures Expenditures 2004 Total Expenditures Known Income 2003 Known Income 2004 $740,198 $655,679 $1,395,877 $1,395,877 $113,838 $262,836 Total Income Total $376,674 Income From Unknown Sources Chapter 6 Forensic Accounting $1,019,203 35 Indirect Method #4 The Net Worth Method Chapter 6 Forensic Accounting 36 Net Worth Method This a common indirect balance sheet approach This to estimate income. Calculate the person’s Net Worth Known Assets less Known Liabilities Add nondeductible Living Expenses to the increase in Net Worth. to Account for any difference between reported Account income and the increase in Net Worth during the year as: the Chapter 6 Income From Unknown Sources Income Forensic Accounting 37 Net Worth Method Some disadvantages with the Some Net Worth Method are: Net •It is difficult for jury’s to understand It •It maybe difficult to identify all the It Assets and all the Liabilities Assets •It maybe necessary to estimate the It value of Nondeductible Living Expenses Chapter 6 Forensic Accounting 38 Steven J. Jerardo Steven Net Worth Analysis Financial Profile January...
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This note was uploaded on 09/09/2013 for the course ACC 468 taught by Professor James during the Fall '12 term at SIU Carbondale.

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