Roasting your financials on an open campfire during a frosty evening in autumn…is it worth it?

Merrick Lawrence on October 14, 2016

Images:  CEO’s Duty of Care

The spoils of record keeping

The law: a three-letter word representing mandatory actions sanctioned by one’s government; federal, state, and local entities that “make the rules”. The funny thing about the law is that it isn’t; you mess with the law and you get burned. The Internal Revenue Service (IRS) requires that all businesses prepare and retain a set of records that can be audited at any appropriate time. The federal government doesn’t run on charity; who do you think pays for all the highways, public servants, military expenses, Social Security, Medicare, etc? The federal government has to get their cut in order to function, and it only makes sense that it should get it from its inhabitants. You see, life is a never-ending cycle. You make money from the community; you give back to the community, it’s that simple. People commit tax evasion, tax fraud, money laundering, and embezzlement because they don’t want to give back to the community. There’s a saying: You can’t have your cake and eat it too. Record keeping is simply a method of following the rules. That individual or set of individuals has to have the intestinal fortitude to keep their hands in their own pockets while skipping as far as the rule maker tells them to.

Setting the books on flames

Financials play an important role when it comes to the fluid operation of any given institution. Whenever they are in order regarding numerical correctness and sound integrity, the business will continue to analyze and improve its products, performance, and personnel. Cooking the books, or administering fraudulent activity onto the company’s financials, can be forged by various means and methods depending on the fraudster’s skill set, along with opportunity. According to Investopedia, these are the eight main reasons why fraudsters bend the rules of the lawmaker:

                               1.   Accelerating Revenues

                               2.  Delaying Expenses

                               3.  Accelerating Expenses Preceding an Acquisition

                               4.  "Non-Recurring" Expenses

                               5.  Other Income or Expense

                               6.   Pension Plans

                               7.  Off-Balance-Sheet Items

                               8.   Synthetic Leases

To put things into perspective, let’s say there was a $4,000 deposit that was credited to your business account. You have an ethical and legal obligation to inform the bank of the error. To be frank, your account is a liability to you, the depositor. With items getting credited to your account, you are actually increasing the liability that is your account because that additional $4,000 was not initially recorded in your books, or accounting records, and is considered an additional item on your bank reconciliation as well. You should honor that bank reconciliation and keep your books and bank statements balanced, doing everything in your power to correct any errors that are to occur in this, or similar processes before journalizing while also utilizing the books as proof to back up your claims, or any claims made against you. Carrying the designation of white collar criminal for the rest of your life isn’t worth the quick cash.