Criminal/penal Case Court/osbnos: 31
Background
A husband sold the family home to his wife. The wife immediately remortgaged that home. After four months, she stopped making mortgage payments on it. Soon after that, the family moved to a new home that they bought in their daughter’s name. The daughter made a $228,000 down payment on the home using money her father gave her. When the wife filed for bankruptcy, she reported her previous house as an asset. In addition to the mortgage debt on that previous house, she owed $169,000 in other debts. The husband filed for bankruptcy 10 months after the wife, declaring debts of $270,000. The husband said that he had given the house to his wife as part of their separation agreement, along with $100,000. Then the husband changed his account of the events and said that he had sold the house to someone else and given $100,000 of the proceeds to his wife as part of a separation agreement. An investigation concluded that the down payment on the second home likely came from the wife’s purchase and remortgaging of the first home in an attempt to shield that money from bankruptcy proceedings. The investigation also found that both spouses accumulated most of their debt in the seven months before they filed for bankruptcy. Each had obtained more than $130,000 in cash advances, as well as bought goods on credit.
Summary of offences of the bankruptsFootnote 2
Court decision
Criminal/penal Caseosb No: 31
Background
The bankrupt had applied for credit cards and personal lines of credit from a number of institutions, giving false information regarding his employment status and earnings. Through these credit sources, he obtained cash advances and did not repay them. He also bought items on retail credit and resold them without paying for them. He said he used the money for gambling, but revealed that he made large payments to family and friends. When he filed for bankruptcy, he reportedly owed about $265,000 and held assets of $4,600.
Summary of offences of the bankruptFootnote 3
- Bankrupt obtained credit or property by making false representations.
- Bankrupt disposed of property obtained on credit and not paid for.
Court decision
The bankrupt pleaded guilty to six counts under the BIA and was sentenced to two concurrent conditional prison sentences of 12 months to be served as follows: The bankrupt will be subject to house arrest and electronic monitoring for the first six months and an imposed curfew for the remaining six months. He was also ordered to repay $145,757.76 to his creditors.
Audit Procedures Performed To Specifically Address The Risk Of Management Override Of Controls
.57 As noted in paragraph .08, management is in a unique position to perpetrate fraud because of its ability to directly or indirectly manipulate accounting records and prepare fraudulent financial statements by overriding established controls that otherwise appear to be operating effectively. By its nature, management override of controls can occur in unpredictable ways. Accordingly, as part of the auditor’s responses that address fraud risks, the procedures described in paragraphs .58 through .67 should be performed to specifically address the risk of management override of controls.
.58 Examining journal entries and other adjustments for evidence of possible material misstatement due to fraud. Material misstatements of financial statements due to fraud often involve the manipulation of the financial reporting process by recording inappropriate or unauthorized journal entries throughout the year or at period end, or making adjustments to amounts reported in the financial statements that are not reflected in formal journal entries, such as through consolidating adjustments, report combinations, and reclassifications. Accordingly, the auditor should design procedures to test the appropriateness of journal entries recorded in the general ledger and other adjustments made in the preparation of the financial statements. More specifically, the auditor should:
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Make Sure Bankruptcy Is The Right Option For You
Bankruptcy can offer you a fresh start if you can’t see any other way out of your debt problems. However, going bankrupt may have a serious impact on your day-to-day life, so it isn’t for everyone. Make sure you’ve done your research, taken advice and are sure it’s the best option for you.
How To Prevent Bankruptcy
Bankruptcy is generally a last resort, for businesses and individuals alike. Chapter 7 will, in effect, put a business out of business, while Chapter 11 may make lenders wary of dealing with the company after it emerges from bankruptcy. A Chapter 7 bankruptcy will remain on an individuals credit report for 10 years, a Chapter 13 for seven.
While bankruptcy may be unavoidable in many instances , one key to preventing it is borrowing judiciously. For a business, that could mean not using debt to expand too rapidly. For an individual, it might mean paying off their credit card balances every month and not buying a larger home or costlier car than they can safely afford.
Before filing for bankruptcy, and depending on their own internal legal resources, businesses may want to consult with an outside attorney who specializes in bankruptcy law and discuss any alternatives that are available to them.
Individuals are required by law to take an approved credit-counseling course before they file. Individuals also have other resources available to them, such as a reputable debt relief company, which can help them negotiate with their creditors. Investopedia publishes an annual list of the best debt relief companies.
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William A Wylie Trustee In Bankruptcy Of The Estate Of Clair V Ward Bankrupt Appellant V Clair V Ward Appellee 292 F2d 590
US Court of Appeals for the Ninth Circuit- 292 F.2d 590
Joseph Bernfeld, Quittner, Stutman & Treister, George M. Treister, Los Angeles, Cal., for appellant.
Ernest R. Utley, Utley & Houck, Los Angeles, Cal., for appellee.
Before CHAMBERS, BARNES and KOELSCH, Circuit Judges.
CHAMBERS, Circuit Judge.
Ward, a tire dealer, in Alhambra, California, has been granted a discharge in bankruptcy by the referee, and the referee’s decision was sustained by the district court on review. We do the trustee no injustice when we say that, in the practical sense, Ward’s largest creditor, the United States Rubber Company, is the real party in interest.
For many years Ward was successful and prosperous in the service station, tire and accessory business. But sometime prior to 1950 he wanted to be bigger and decided to profit from the then greatly expanding business of retail selling of television sets. Before too long the whole television price structure collapsed on him. Eventually, as a consequence, he had no business at all. First, the sheriff came on May 19, 1953, with a state court attachment issued at the instance of the rubber company. After making heroic attempts to operate the business with the sheriff astride him, he made an assignment for the benefit of creditors on June 8, 1953. That lasted until the following September 28, 1953, when three of his television creditors filed a petition for involuntary bankruptcy. An adjudication thereof followed and Wylie was named trustee.1
Criminal/penal Case Court Nos: 500
Background
Following his separation, a man sold his house and spent the $85,000 in equity at the casino. His credit-card debts went from $1,500 to more than $137,000 in nine months. Among other things, he purchased construction materials, furniture and electrical appliances. At the time of his bankruptcy, he had no assets. He attributed his bankruptcy to his separation and gambling.
Summary of offences of the bankruptFootnote 2
- Bankrupt used deceit, falsehood or other fraudulent means to defraud various credit-card companies of different amounts of money.
Court decision
The bankrupt was found guilty of 14 counts of fraud. He was sentenced to 12 months, to be served in the community, with the following conditions:
- remain at home 24 hours a day for the first four months, and between 11:00 p.m. and 7:00 a.m. for the next eight months
- refrain from going to casinos
- perform 150 hours of community service within eight months.
In addition, 12 months of probation and prohibition against going to casinos will begin at the end of the sentence.
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Examples Of Fraud Risk Factors
.85 A.1 This appendix contains examples of risk factors discussed in AS 2110.65 through .69. Separately presented are examples relating to the two types of fraud relevant to the auditor’s considerationthat is, fraudulent financial reporting and misappropriation of assets. For each of these types of fraud, the risk factors are further classified based on the three conditions generally present when material misstatements due to fraud occur: incentives/pressures, opportunities, and attitudes/rationalizations. Although the risk factors cover a broad range of situations, they are only examples and, accordingly, the auditor may wish to consider additional or different risk factors. Not all of these examples are relevant in all circumstances, and some may be of greater or lesser significance in entities of different size or with different ownership characteristics or circumstances. Also, the order of the examples of risk factors provided is not intended to reflect their relative importance or frequency of occurrence.
This Problem Has Been Solved
which of the following statements about bankruptcy is false?
a. a company going through reorganization will file a chapter 11bankruptcy
b. a company going through liquidation will file a chapter 7bankruptcy
c. a chapter 11 bankruptcy cannot be changd to a cahpter 7bankruptcy
d. in a chapter 7 bankruptcy, unsecured creditors usuallyreceive nothing
e. a company can emerge from chapter 11 bakruptcy with a higherchance of success
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Criminal/penal Case Court/osbno: 31
Background
A bankrupt had not provided her trustee with a statement of income and expenses, nor proof of her income, as required by the BIA. She had also written a cheque to the trustee that her account could not cover. Stating that she was in financial hardship, the bankrupt asked permission to cash a Registered Retirement Savings Plan that was exempt from seizure during her bankruptcy. The institution holding the RRSP asked for proof that she had been discharged from her bankruptcy or permission from her trustee. She had not been discharged from her bankruptcy nor did she have permission from her trustee, so she gave the institution a falsified letter of discharge, forging the signature of her trustee. The falsified letter included the bankrupt’s phone number as the contact number and she identified herself as a trustee when she received a call from the institution holding the RRSP. The institution contacted the trustee office, which confirmed that the bankrupt had not been discharged.
Summary of offences of the bankruptFootnote 3
- Bankrupt used a forged document.
Court decision
The Court ordered a suspended sentence with one year of probation and 25 hours of community service. The bankrupt did not appear for her bankruptcy discharge hearing and remains undischarged.
Making False Statements: Elements Of The Crime
In order to get a conviction on these types of charges, federal prosecutors must prove beyond a reasonable doubt that the:
- Defendant made a false statement or used written materials containing a false statement during a procedure within the jurisdiction of a government agency or department
- Defendant acted willfully and
- Statement was material to the business of the government agency or department
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One Involves Liquidating Assets While The Other Reorganizes Them
Companies that find themselves in a dire financial situation where bankruptcy is their bestor onlyoption have two basic choices: Chapter 7 bankruptcy or Chapter 11 bankruptcy. Both are also available to individuals. Here is how these two types of bankruptcy work and how they differ.
Withdraw Some Money For Your Living Costs
There may be a delay of several days between your bankruptcy order being made and the official receiver taking control of your money and property. However, your bank or building society accounts may be frozen immediately, meaning you won’t be able to access any money. Therefore, you should take enough money out of your account to cover your costs for the next few weeks, if possible.
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Criminal/penal Case Court/osb No: 31
Background
An individual had been unemployed for a period of time, but somehow obtained financing to purchase a property, which he later abandoned. The property was then sold by the mortgagor who took a loss on the sale. When the individual filed for bankruptcy, his statement of affairs listed unsecured liabilities of more than $213,000. When he was examined under oath by the OSB, the bankrupt could not explain how he was able to obtain the financing while being unemployed nor the circumstances surrounding the property purchase. Also, the bankrupt could not answer questions about the financing nor the assets of three short-term businesses he had started.
Summary of offences of the bankruptFootnote 2
- The bankrupt disposed of property fraudulently.
- The bankrupt did not fully and truthfully answer questions when examined under oath.
- The bankrupt failed to comply with his duties under the BIA.
Court decision
The bankrupt pleaded guilty to three offences under the BIA and received an 8-month conditional sentence. He must also pay restitution orders of $78,000 to the Canada Mortgage and Housing Corporation and $100,000 to his trustee.
102641 Periodic Statements For Residential Mortgage Loans
1. Recipient of periodic statement. When two consumers are joint obligors with primary liability on a closed-end consumer credit transaction secured by a dwelling subject to § 1026.41, the periodic statement may be sent to either one of them. For example, if spouses jointly own a home, the servicer need not send statements to both spouses a single statement may be sent.
2. Billing cycles shorter than a 31-day period. If a loan has a billing cycle shorter than a period of 31 days , a periodic statement covering an entire month may be used. Such statement would separately list the upcoming payment due dates and amounts due, as required by § 1026.20, and list all transaction activity that occurred during the related time period, as required by paragraph . Such statement may aggregate the information for the explanation of amount due, as required by paragraph , and past payment breakdown, as required by paragraph .
3. One statement per billing cycle. The periodic statement requirement in § 1026.41 applies to the creditor, assignee, or servicer as applicable. The creditor, assignee, and servicer are all subject to this requirement -4), but only one statement must be sent to the consumer each billing cycle. When two or more parties are subject to this requirement, they may decide among themselves which of them will send the statement.
2. Courtesy period. The meaning of courtesy period is explained in comment 7-1.
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Documenting The Auditor’s Consideration Of Fraud
.83 The auditor should document the following:
- The discussion among engagement personnel in planning the audit regarding the susceptibility of the entity’s financial statements to material misstatement due to fraud, including how and when the discussion occurred, the audit team members who participated, and the subject matter discussed
- The procedures performed to obtain information necessary to identify and assess the fraud risks
- The fraud risks that were identified at the financial statement and assertion levels , and the linkage of those risks to the auditor’s response
- If the auditor has not identified in a particular circumstance, improper revenue recognition as a fraud risk, the reasons supporting the auditor’s conclusion
- The results of the procedures performed to address the assessed fraud risks, including those procedures performed to further address the risk of management override of controls
- Other conditions and analytical relationships that caused the auditor to believe that additional auditing procedures or other responses were required and any further responses the auditor concluded were appropriate, to address such risks or other conditions
- The nature of the communications about fraud made to management, the audit committee, and others
Criminal/penal Case Osb No: 41
Background
An individual used 18 credit cards to accumulate $84,000 in debts in just 12 months, bringing his total credit card debt to $156,000. During the same period, he attempted to pay the credit card companies by writing bad cheques totalling $30,000. He also took advantage of store financing to obtain $7,800 in home electronics. At the end of the 12-month period, he filed for bankruptcy.
Summary of offences of the bankruptFootnote 2
- The bankrupt committed fraud.
The bankrupt pleaded guilty to 10 counts of fraud under the Criminal Code and received an 18-month conditional sentence. He is to serve the first 12 months under house arrest and the last six months under curfew. This is to be followed by 24 months of probation. He must also complete 150 hours of community service within a 15-month period.
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Description And Characteristics Of Fraud
.05 Fraud is a broad legal concept and auditors do not make legal determinations of whether fraud has occurred. Rather, the auditor’s interest specifically relates to acts that result in a material misstatement of the financial statements. The primary factor that distinguishes fraud from error is whether the underlying action that results in the misstatement of the financial statements is intentional or unintentional. For purposes of the section, fraud is an intentional act that results in a material misstatement in financial statements that are the subject of an audit.4
.06 Two types of misstatements are relevant to the auditor’s consideration of fraudmisstatements arising from fraudulent financial reporting and misstatements arising from misappropriation of assets.
Fraudulent financial reporting need not be the result of a grand plan or conspiracy. It may be that management representatives rationalize the appropriateness of a material misstatement, for example, as an aggressive rather than indefensible interpretation of complex accounting rules, or as a temporary misstatement of financial statements, including interim statements, expected to be corrected later when operational results improve.
