Potential corporate fraud – FBI investigates

• FBI probes Fannie, Lehman & AIG Case studies

Guess who’re the current names in the FBI list? Fannie Mae is one; the rest are Freddie Mac, the Lehman Brothers Holdings Inc. and AIG Insurance. However, it’s the senior executives for AIG that are the prime targets of FBI. The reason? A potential fraudulence suspected on mortgage deals. Despite the lack of specifics by FBI, it is now an open secret that their inquiries are just a part of a broader investigation.

• What’s being investigated?

FBI suspects these financial institutions – to be precise, their senior executives - are responsible for misinforming the public that has contributed to the U.S. mortgage industry collapse. As reported by one of the federal law enforcement official, it is one of the 26 potential corporate fraud cases that are currently being investigated by FBI.

• From the horse’s mouth

The U.S. Congress has been reported of 24 such cases of potential corporate fraud. Robert Mueller (Director, FBI) disclosed the details of the same and also the fact of the count, which were 21 during July. As a testimony, the FBI chief also confirmed the House of Representatives Judiciary Committee regarding pursuing the corporate executives of the mortgage industry if the situation demands, from every level to frame the federal charges on the ground of misstatements of assets.

International Accounting Standards

A positive approach by the securities and Exchange board

• US move towards International Accounting Rules

There are a lot of people who has come across the name Securities and Exchange Commission; what a large chunk is still clueless about is their decision regarding allowing certain big-scale American companies to use international accounting standards from 2009. The figure is expected to reach 100% by the end of 2016 and if everything goes right, the world shall move towards using one fixed set of standards to facilitate the comparison of different companies by investors. Differing regions are not going to be an issue in this endeavor; moreover, raising capitals for an attractive market shall become easier for firms interested in that particular sector.

To fit the criteria as presented by the proposal, a company needs to be one among the 20 largest companies in that industry sector worldwide. The commission shall also require the large American companies to comply to the new set of international standards to prepare their financial statements for the year 2014, with the smaller ones following the path in 2015. The smallest companies; however, may delay adopting to the new standards until 2016, since the final decisions on these shall be pending till 2011 and shall be in the hands of S.E.C.

The only problem that experts are speculating is regarding learning new accounting rules by the auditors and other accounting professionals, but considering the advantages, it shall be a small burden to bear. And facilitated by a new monitoring body comprising regulators from many countries and soon to be established by international authorities, the chances of political influences can simply be overruled. That leaves us only with the question of uniform application of the rules, which, though being tried to be converged by the international and the American board, are still showing signs of differences with the international rules.

• Advantages & Disadvantages of a common accounting system

In a common accounting system, accountants stay responsible for recording the revenues and every form of expenditure along with acquisition of assets and disposal according to an actual amount of money (or money equivalent) that is received/paid to complete a transaction. However, the common accounting methods only consider an acquisition cost of assets without recognizing their values in a current market. That’s cost allocation and not determining an asset’s value; despite the methods being informative regarding acquisition costs of assets as well as their deprecations, they ignore every possibility of determining the current market value of the same asset, which may be either higher or lower than is suggested.

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US Federal Reserve loan resuscitates Insurance giant AIG…crisis looms large on Morgan and Goldman.

The chaos spread after the Lehman Brothers filing for bankruptcy protection has caused enough ripples and with the breakdown of AIG it could have spelt doom for the US financial market and its ripples could have affected the World Economy.
With fears unabated on the ability of Investment banks access to liquidity, the Goldman Sachs and Morgan Stanley shares dropped by 10 and 18 percent and were giant losers.
The other financial Institutions hit by this fallout are Wachovia, Citigroup one of the biggest US bank. Also the stock of Washington Mutual fell sharply. These falls comes after AIG was taken over US Federal.
The Federal Authorities pumped in $85 billion in the AIG lifeline for the period of two years with a committed stake of 79.9 percent equity.
The decision came two days after the US authorities let Investment bankers Lehman Brothers into bankruptcy court. Unlike Lehman brothers AIG was considered to be more important as its collapse can trigger a fall in the global economy.
In the course AIG would have to pay a steep rate of Interest that is 8.5 percent and above, equaling the current rate of 11.4 percent.
The AIG being the premier sponsor of Manchester United, it means the US taxpayers money going to the English premier league.

US recession looms large

• Just a song before we start…

What goes up must come down; the only two things that don’t follow this set rule are age and experience. US have followed the same path till now; the post-WWII America has gifted its people an enjoyable life, have given them the freehand of wasting for pleasure (so cheap were food, gas and similar other things), but of recent, Asia and the neighboring developing countries have been noticed climbing up the success ladder. The world doesn’t catch a cold now when America sneezes like the previous years and The American Dream is now turning to a nightmare. And joining the league of American Presidents is currently being considered as the stickiest job of all.

• What is recession?

The world seems to have gone paranoid talking about a recession, chances of which are now looming over the United States and being reflected to the max in the form of a worldwide economic slowdown. So how come the weakening of the American economy is affecting the rest of the world? To know that, we must have a clear concept of what a recession is.

Recession is defined as a decline in a country's GDP (gross domestic product) growth over consecutive quarters of a fiscal year. If these quarters are noticed to be slowing down, a recession might be imminent.

There can be several factors triggering a recession; it could be due to an economy slowing down after a period of steady growth. This could occur following the trend a normal economic cycle follows, which is a six month to twenty-four months recession occurring after a 6 to 10 years of steady growth. It may also happen if the consumer sections start losing confidence in the way the economy is growing and become tight fist, thereby hampering the demand for goods and services. This eventually leads to a decreased production rate, loss of job and an increased unemployment rate. As a result, investment sectors also head for a toss since people fear to put their money in fear of reduced stock values and the stock markets also start gathering negative sentiments.



• Current crisis in US

Despite the Bureau of Economic Analysis’ denial from declaring a recession, the world fears an overall slowdown of the global economy. Is Asia one of the continents to suffer the same way? To know the results of how the US slowdown shall impact the Asian market, it’s paramount that we get an idea of the crisis US is facing currently. That is to say, the prime causes and the effect they are bringing in.

The sub-prime mortgage market in the US exhibits more number of defaulters now than before. The home-loan defaults are now a major crisis; this also proves that there re more number of people with poor credit-worthiness/unstable incomes than the well to do. The nose-diving sub-prime market has thus led major banks into trouble; what was thought before would take the housing market to new heights, backfired the schemes of making home-loans easily available. The boom was a flash-in-the-pan; it failed to sustain the momentum. Inevitably, the colossal loan defaults made the sector collapse. Foreclosures became the most common thing that joined forces with the rising oil prices ($100/barrel).

• How will US slowdown hit the Asian market?

The stock markets follow the economy that is currently traveling downhill. That’s affecting the economic buoyancy and In India, the stock markets crashed due to this slowdown. The Sensex went down almost 13% in January but a bounce-back occurred as soon as the US Fed reduced the interest rates. That’s better than before but Indian investors don’t seem too happy with the current stock prices waning.

Fears are also looming over the outsourcing sectors, of which, Asia holds the lion’s share. If US has less money to spend, the outsourcing industry that has grown substantially all these years is going to decline; the Indian economy alone is likely to go down as much as by 2% in the 2009-2010 fiscal year. Profit margins shall shrink drastically.

• Impact of recession

As for the other exporters, the strengthening of the rupee against the dollar is heralding long-term, stable prospects; it shall make foreign money enter more to Indian markets and reduce the oil prices. That’s definitely bringing down inflation. Overall, either entire Asia would be falling victim to a recession triggered by the US economy, unless it becomes totally independent from the rest of the world.

• How to fight recession

Proposals are on for a lowered tax structure as the first step; it amounts to a $150-billion bailout package. Moreover, the US government has taken initiatives for creating more vacancies in the job sectors (new jobs as well) to boost both manufacturing and services sectors with special attention been given to the private sectors to avoid the ill-effects of the current crisis.

Public accounting firms – need for accountants

Overview

Preparation, maintenance and review of the financial statements and records belonging to other businesses - these are all that define what a public accounting firm is all about. Additionally, it’s also tax calculation and submission of returns that form a crucial part of the functions of any public accounting firm. A CPA license I therefore, a must for the employees of reliable public accounting firms; however, degrees in corporate law are also preferred if anyone wishes to get into the public accounting firms.

Pros and cons of hiring accountants

Those fresh out of colleges and not too sure of where they should head for a prospective career, often choose the public accounting firms as a place for seasoning. An internship at any of the top-of-the-line public accounting firms imparts the required knowledge as well as provides a hands-on experience on the operations of a number of companies from different industries; as a result, the resume of a person working for sometime in the public accounting sector receives major face lifts. It counts with a wide range of potential employers including the client companies. The financial reward comes complimentary. The companies hiring certified public accountants or accountants who are similarly qualified thus get a dedicated service regarding taxpaying procedures. Moreover, a company need not run around to know the benefits or relief it is eligible for and neither does it require to spend extra hours or dollars if something crucial needs to be taken care of immediately. But then again, while outsourcing to accounting firms is a pay-per-assignment phenomenon, hiring certified public accountants for dedicated services is a recurring expenditure and for running the audits, you need to hire certified public accountants from outside. This increases the costs as well.

Types of Public Accounting

i. Audit: For small businesses, outsourcing stands as the best choice to keep their financial records spic-n-span. For larger businesses, the internal accounting and finance personnel get it done. But when it comes to conducting the audits, they hire the public accounting firms. The audits are inspections of the accounting procedures and records and require trained accountants or even better, the CPAs. With publicly traded securities, any company requires its financial reports to be public (as per the law) and for that, they need someone impartial. Independent and certified public accountants (or public accounting firms) are thus the best choices; more so, because there also stays associated the analytical skills for running the securities research.

ii. Tax preparation: Small businesses or individuals alike can benefit largely from independent and certified public accountants or the public accounting firms, in terms of preparing the tax returns. For larger businesses, it is generally taken care of by in-house staff despite their preferences of getting the results checked by an auditor later. The tax function requires staff with CPA licenses and/or law degrees. The tax professionals within a public accounting firm also advise clients on strategies to reduce their taxes in the future.

iii. Systems Consulting: Designing and implementation of a data processing system for a large-sized public accounting firm is also a task that can be accomplished by public accounting firm. To simplify it more, it’s a specialized service in the realms of accounting and financial reporting, where an automated system takes care of everything. A technical expertise is definitely an added advantage for the firm undertaking such tasks and the job embraces understanding a client’s needs and developing accordingly a solution that’s user-friendly.

iv. Management Consulting: General management consulting forms an intricate part for some of the largest public accounting firms. Management consulting is about providing advises on businesses; it ranges from setting an overall business strategy to finding solutions to highly specific problems regarding logistics, workflows or organizing staffs.


Specialization

Specialization and consultations are the two sides of the same coin where one cannot happen without another. A public accounting firm’s tasks of selling engagements become easier if there remains present industry- and functional specialists, who can solve problems for their clients with relevant experiences and knowledge. However, specialization also restricts a person from delivering solutions from different perspectives and doesn’t provide room to his creativity; instead, he needs to follow set guidelines to appear to a solution. That’s an enhance productivity at the cost of job satisfaction for those who seek variety.

Conclusion

From one-man shows to an entire platoon, public accounting firms can vary dramatically in their respective strength of the workforce and are generally partnership ventures than corporations. This alone shows the importance of the people being trained and certified in their respective job sectors (unless a partner is good, none would like to stick with him); more so, for unless there remains an assurance regarding expertise in a vast number of related fields, big, corporate clients are not going to entertain.

Health Insurance – finding the best deal.

Health Insurance – finding the best deal.

Fear of the unknown is perhaps the strongest emotion that compels humans to initiate an action; evident from their interests ranging from education to astrology and from their bonding they share with others, it is the same factor that makes them take up health insurance. Surveys have proved that people usually take the step in order to make their near and dear ones feel secure instead of them, but more often than not, end up choosing the wrong policies. It’s mostly the health insurance agents who are to be blamed; however, staying well informed on certain aspects regarding the policies and the advantages of health insurance schemes can help you find the best deals and save a lot of hassles later on.

Finding the best health insurance coverage depends on a few factors; these are the criteria, which must be fulfilled before an application is made. Instances have been found where the insurance agents had misguided applicants just because a certain policy would return higher commissions upon sale. But if the buyers stay well equipped with sufficient information on the insurance coverage, the same benefits can be availed with lower premium rates.

 Buying Health Insurance

Prior to buying, you must understand the categorizations of health insurance plans. If it’s a managed care health plan, then know that it is a scheme that’s more popular and brought over by Health Maintenance Organization (HMO), the Preferred Provider Organization (PPO) and the Point-of-Service Plan (POS). For fee-for-service or indemnity plans, there remains an opportunity to choose a primary health care provider; it also eliminates the needs for referrals if there comes up a need for specialized treatment. This is why an indemnity plan receives much more acceptance despite a higher price tag that remains attached.

But we also need to focus on the state policies to find an affordable health insurance. For residents of Kentucky, Maine and Washington State, choices are limited; for rural areas, a HMO plan is not always the best choice. Most of the states lack Association plans, despite the good deals they offer. Add to this the options that raise deductibles on coverage; however, one good thing about them is they lower the prices significantly.

Thus, to make the most of any given situation, follow the steps discussed below.

 Health Insurance in 6 steps

i. Awareness: Be clear about your preferences. There are different insurance policies for people with different needs upon which minor improvements are possible.

ii. Compare: Quotes must be obtained from different insurance companies to find out who’s offering the maximum level of coverage that you want. Then choose the most affordable one.

iii. Negotiate: Ask for a reduction in the premium amount after choosing an insurer. This shall gain you the best prices for your preferred insurance coverage.

iv. Group Policies: Group plans open the doors to maximum afford ability since they allow negotiations more than any single health insurance policy.

v. Deductibles: The deductibles are usually payable on an annual basis and vary accordingly with specific policies. Increase the deductible amount to lessen the premiums but it may also turn you down in case you need to rely entirely on a health insurance policy.

vi. Flexibility: PPO and HMO plans may provide lower rates if you stick to the list of preferred providers.

DIY Bookkeeping – 10 common mistakes

Numbers are boring and so are mechanical tasks; put them together and that perhaps explains why small business owners ignore bookkeeping till it’s the eleventh hour. So, that’s hurrying; and hurrying makes you pay the prices dearly at times. So dollars just migrate from your ledger’s bottom lines to the Tax Office. And it’s a process called audit that stays responsible.

Auditing examines carefully for accuracy of accounting procedures and records maintained by a business. In case mistakes are noted, the only way to rectify them is by paying fines. Thus, to maintain the fine balance between do-it-yourself bookkeeping and avoiding mistakes, you should pay close attention and avoid a few things from occurring.




First of all, it’s the accounting software packages. No two packages are made the same and however simple they might seem; they end up complicating the processes all the more if the user (in this case, the business owners) is not savvy about them. The end result is double (or even triple) the amount of work and desired reports is well replaced by inaccurate bookkeeping records. Before you start using such software, it’s paramount that you have a formal training on the same. Nothing that’s too complicated for a certain level of accounting expertise can make things go better.

Perhaps you have heard about short-changing; those who have not, it is cheating someone by not returning the person enough money. And that person could well be you! Many of the business owners do this when it comes to tax deductions; what can be claimed rightfully is often neglected because accurate cash expenditure records are never maintained.

Now, about the Goods and Services Tax and do it yourself bookkeeping mostly gives rise to three simple mistakes regarding:

• Claim of GST credits against invalid/no tax invoices.
• Claim of GST credits for an entire purchase amount while the goods are used for private purposes and not up to the fullest extent.
• Claim of GST credits when the supplier(s) is/are not registered for GST.

Staying careful on these three aspects can alleviate complications at the time you file your taxes.

Another part often overlooked by self-taught bookkeepers and during a do it yourself bookkeeping session is sending invoices too late. This lets overdue debtors escape despite blocking your money. Therefore, keep track through an appropriate system that shall maintain a list of debtors and the payments due.

The policy of super-annuation i.e. an employer paying 9% of an employee’s earnings (not overtimes) is another source of confusion for the self-taught bookkeepers. The Superannuation Guarantee Legislation still stands as an unclear theory to many of us resulting in over payments. It’s important that the policy is clearly understood.

Missing deadlines often turn out to be fatal for a business; more so when it involves PAYG or BAS besides checking records with the bank. The problem triples since no back-ups are maintained most of the times; this proves even more devastating in case there is a technical breakdown. So how to make all the ends meet?

It’s easier than it seems; bookkeeping mistakes can easily be avoided with the help of a trained professional. Even if you are reluctant to hire a bookkeeper working full time for you, there are many who undertake outsourced accounting jobs; with the
right person to polish your account details resulting from your do it yourself bookkeeping skills, there’s absolutely no reason why we can’t see you as the next millionaire.