Name
Course
University
6/12/2014
Discussion 1
Imagine a situation in which a client under audit by the IRS omitted $100,000 in income. From the e-Activity, examine the major factors relative to the omission by the client that would result in a criminal investigation, rather than a civil fraud proposal by the IRS.
Evidence of Fraud It must be noted that any such activity comes under fraud or an attempt to miscommunicate to the stakeholders of the company. But there hardly is any way left for the officials to figure out it was a fraud or not since no direct proof is left. It is possible that the omission of this amount might have resulted from a misstatement or by mistake and was not intended by the company. On the other hand, there are chances that it was done by the company intentionally to avoid paying higher taxes on the income and increasing the tax expense of the company. For fraudulent omission, the company may have the intention of deceiving the tax department by making some material misstatements, or altering the financial statements to evade taxes. As has been mentioned before, it is difficult to know whether the misstatement was intentional or not but there are some minor ways of making that hint. If the income has been understated then it can be an attempt at fraud except that all other calculations were correct and there was just a typing mistake at the summed up amount at the end. If there are fictitious deductions present in the financial statements or deductions without any reason, then it is a fraud. Another way to catch the fraud is to find out if all sets published by the company of financial statements are alike. If there are different sets and different accounting details in them, then it is a fraud. In addition to this, if the company has a record of constantly under-representing its statements over years then it is a fraud by the company. Another way to check this is to ask the company to