A BRIEF NOTE ON

VAT LAWS OF UNITED KINGDOM

Author : Bhaskar Thakkar, thakkar@btassociate.com

Liability to value added tax (VAT) VAT is charged on the value of supplies of taxable goods and services made in the UK, including some exports to EU countries. It is also chargeable on imports of goods from outside the EU.

The main rates are zero and 17.5%, but a few supplies are charged at 5%.

Registration

The supply of any goods and services, which are subject to VAT at any rate are called taxable supplies whether you are VAT registered or not. All traders must register for VAT if they make taxable supplies which exceed the set limits. Where the value of taxable supplies in the previous 12 months was more than £61,000, or is likely to exceed this annual limit within the next 30 days, the trader has to register within 30 days. Failure to notify on time attracts penalties.

The VAT system

A registered trader must charge customers output VAT on any sales. The value of input VAT can be offset against output VAT and the excess output VAT is paid over to Customs and Excise. Where there is an excess of input VAT, tax may be reclaimed.

Some input VAT cannot be reclaimed:

• Purchases of motor cars, except cars bought wholly for business purposes.

• Business entertainment expenses.

Most businesses have to account for VAT at the date that the invoice for the supply is raised. However, traders can claim VAT bad debt relief on debts more than six months old that have been written off.

Traders with a turnover of not more than £660,000 may account for VAT on a cash basis rather than an invoice basis, thereby obtaining automatic relief for any bad debts. This limit is due to be increased to £1,350,000 probably from 1 April 2007, subject to EC approval.

About Author

Author Mr.Bhaskar Thakkar is a practicing Chartered Accountant from India president of Ms. BT Associates and partner in M/s. Global Associates. The said firms are located in the eastern province of India having 150 employees. The firm is specialized in providing Accounting, Tax and Legal Services. They have diversified business in CAD conversion and drafting services.

For more information visit www.jobs2india.com www.convert2cad.com www.btassociate.com

Exempt supplies

Certain supplies are exempt from VAT. Output VAT is not charged on such supplies and, in principle, input VAT attributable to such supplies cannot be reclaimed (or the claim is restricted).

Relatively small businesses may be able to reclaim all their input VAT – even for their exempt supplies. The input VAT attributable to their exempt supplies must not exceed £7,500 a year and must be no more than half the VAT on all their purchases.

• Exempt supplies include: insurance, finance, health, education, and burial and cremation services.

• In general, leases and sales of non-domestic land and buildings, other than newly built ones, are exempt, unless the option to tax has been exercised.

• A taxable person may choose to charge output VAT on supplies of existing buildings and land (including rents) that are not used for residential or charitable purposes.

• Sales of new buildings are standard-rated unless they are used for residential or charitable purposes.

Zero-rated supplies

If a business makes zero-rated supplies, it does not charge VAT on supplies but can reclaim input VAT.

Zero-rated supplies include :

• Most food and some drinks – but not catering, restaurant meals or hot take-away food.

• Domestic supplies of water and sewerage.

• Books and most other publications.

• Sales of new residential buildings and buildings for use by charities.

• Supplies of services by contractors when constructing new residential buildings or buildings for charities.

• Alterations to some buildings where listed building consent is needed.

• Public transport of passengers.

• Drugs, medicines and aids for the disabled.

• Clothing and footwear for children.

• Exports of goods and certain services to non-EU countries.

Reduced rate supplies

Some supplies are charged at a rate of 5%. They include:

• Domestic power and fuel and certain energy saving materials for residential or charitable use.

• The grant funded installation of heating equipment and the connection of a mains gas supply in the sole or main residence of an individual aged 60 or more or in receipt of social security benefits.

• Woman’s sanitary protection products.

• Children’s car seats.

• Cycle helmets.

• Conversions of residential property into a different number of dwellings, certain conversions into care homes or multiple occupancy dwellings, and certain renovations or alterations of property that has not been lived in for three years.

EU single market

Where sales are made to businesses that are registered in other EU countries, the supplier need not charge VAT.

• The customer’s VAT number must be shown on the sales invoice.

• The customer is then responsible for accounting for output VAT on the goods on its own VAT return, but may claim input VAT if the goods are for use in making taxable supplies.

• However, output VAT must be charged on sales to private individuals in other EU states. Where such sales exceed that state’s registration threshold, the trader must register for VAT in that state.

Collection of VAT

Registered traders normally have to submit VAT returns, and pay any VAT due, every three months.

• Traders who regularly reclaim VAT from Customs and Excise may apply to submit monthly returns.

• Some large companies have to pay monthly.

• Tax on imports from outside the EU has to be paid at the time of importation, unless special arrangements are set up.

• Traders with a turnover of £1,350,000 a year or less can complete annual returns only, making nine monthly VAT payments on account, with a final payment due along with the year-end return.

• Very small businesses can simplify their accounting by applying to pay VAT at a flat rate on total turnover without deducting input tax. The business must have taxable turnover (including exempt supplies) up to £150,000 and total turnover of not more than £187,500. The rate is determined by trade sector.

• Penalties are charged for late or incorrect VAT returns.

• A default surcharge of between 2% and 15% of the VAT payable is charged where returns are late.

• A penalty of 15% is charged for serious or persistent misdeclarations.

• Interest can also be charged on VAT paid late.

Bhaskar Thakkar
http://www.articlesbase.com/business-articles/a-brief-note-on-vat-laws-of-united-kingdom-107963.html

A recession is defined as a decline in a country’s Gross Domestic product (GDP) or negative growth for two or more successive quarters of a year.

Recession is caused by any one or combination of the following factors:

1. Currency Crisis:- This happens when the value of a currency changes quickly, undermining its ability to serve as a medium of exchange.
2. Inflation;- It is the result of a rise in the general level of prices of goods and services in an economy over a period of time.
3. National Debt:- Recession follows when a sovereign government is unable to pay off national debt.
4. Speculation & economic bubbles:- Speculation causes prices to deviate from their intrinsic value. Recession follows when such hyped prices crash.
5. War:- When two or more nations are at war over a considerable period of time, it can prove to be a drain on the economy and can result in recessionary trends.
6. Under consumption:- When there is under consumption it leads to a situation where stagnation will set in as production will be stopped, resulting in recession.
7. Over production:- If there is over production on a large scale, it would lead to the reduction in value of the produced goods, thereby leading to lower prices and unsold stock.

The current recession seems to be the fallout of bursting of Economic (read Housing) bubble and overproduction (read over availability of mortgage credit).

The real estate prices had been growing to astronomical figures due to hyped demand. This hype in demand had been caused by over-availability of easy credit. When there was snap in one of them, the entire bubble burst. Add to that, the continued rise in oil & steel prices and the stage was set for recession in US. The involvement of big players the world over resulted in this enormous recession in the entire world.

The recession in US has been confirmed by a negative growth of GDP. In fact the GDP in US has shrunk 0.5%, the most since 2001 (when the last recession took place).

What has been the fallout of this recession in US?

Bankruptcies

Squeeze in credit availability from banks

Foreclosures

Reduced sales

Stock Market crash

Rise in Unemployment

So, how does recession impact outsourcing?

As it has with all other forms of businesses, recession also has a huge impact on outsourcing.

And the impact on outsourcing can be as varied as the two poles!

Sine in recessionary times, there is severe credit & fund crunch, businesses will like to optimize whatever available resources they have. And they would look at outsourcing option as one which could lead to sustained profitability because of the lower costs involved and 24/7 availability of the outsourcer.

But at the other spectrum of the debate is rising unemployment. In Nov’08, unemployment in US was at 4.9% with economists predicting a further rise to about 6% to 7%. In fact, in October, 2008, the service sector of US shed about 240,000 jobs. And that’s a huge number we are looking at!

And this has stirred the conscience of many a businesses. The thinking is: when my own countrymen are losing jobs, why do I ship jobs to other countries? I could very well help few of my countrymen offering jobs at reduced costs.

While this line of thinking is certainly appreciable, it is pertinent to note that outsourcing is not a tool to reduce job opportunity in a country. Outsourcing should be used as a strategic tool for a business to grow and not look at it as a mere tool for cost control.

Here is a small illustration of what it means:

Suppose a businessman A has an in-house accountant to record his daily transactions and prepare the monthly Income & Expense Statement for helping the businessman to take strategic decision about his business. On an average, the hourly rate for an accountant (with less than 1 year of experience) is $14.14. The monthly fixed cost assuming a 40 hours week would be $2,262. And this is only for accounting. The businessman has to again shell out $300 upwards for preparing his business’s tax return from a CPA.

On the contrary, if businessman A decides to outsource his entire accounting function to APT Services, he would be charged $1,280 per month for all services including the tax return preparation. Add to this, the benefit of getting highly professional reports on the current state of the business which would be far better than reports generated by an accountant with less than a year’s experience.

So, cost wise, it makes sense to outsource accounting to APT. But doesn’t that mean making one person jobless?

Not necessarily. The person’s time can be split into: time to interact with APT for reports etc. and time for the core area of the business. This would have two pronged effect on the person and the business:

a)      The person would be able to generate additional direct revenue for the business and also learn a lot from associating with professionals at APT.

b)      The business gets additional revenue while cutting down the overhead.

Thus by associating with APT, you can do business without hurting your conscience!

Steve Walker
http://www.articlesbase.com/outsourcing-articles/recession-and-outsourcing-moral-dilemma-696144.html

Are you seeking for a home business opportunity? Congratulations. You may not know it but you are an innovator and you are helping redefine how the world conducts its business. With the rapid expansion of the Internet, sooner or later you will find the financial rewards that you are looking for.

In any societal revolution, it is the people who try to do things better who come out on top. When the Agricultural Revolution happened, the men who understood farming and husbandry gained the most. When the Industrial Revolution came about, it was the men who harnessed the power of machinery who became the wealthiest. And today, in the Information Revolution, it is those who can understand and harness the power of the world wide web who will dictate the future.

As you seek fo a home based business opportunity , you are one of the elite group of people who have awakened to the potential of this new medium. Whether you know it or not, each day that you surf the internet, looking for new things and better things, you are contributing to the advancement of internet business, a process that started so very recently, yet has advanced faster than what we could have ever imagined.

In todays world, everything is fair game. If you have something to offer the world, it doesnt really matter who you are and where you came from. You have the opportunity. More and more, the global marketplace does not look into an individuals skin or his religious leanings. Today, it is more about what you can provide. Again, you must understand that you have something to offer and it is your job to let the world know that you are in business.

The particulars of the product you offer will have little bearing in your success. It is the quality of that product and the way you market it, that will determine whether or not you get the financial rewards you seek. Whether you are a lawyer, an accountant, a salesman or a plumber, you must learn to take advantage of the opportunity that has opened up for literally millions of people around the world. In this day and age, opportunities are everywhere. Be on constant lookout and you cannot fail to spot the many chances that come your way with each passing day.

Remember, It is all about quality. If the goods and services you offer will solve someone elses problem, that person will be more eager to buy than you are to sell. As a home based business opportunity seeker, make it your business to solve the problems of other people. Provide for what they need and they will be glad to provide for what you need.

Obinna Heche
http://www.articlesbase.com/business-opportunities-articles/home-based-business-opportunity-the-wave-of-the-future-50672.html

http://www.trimergeconsulting.com Atlanta Accountants. Accounting and CPA firm in Atlanta Ga. Audit and Assurance services.

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If you would like to get all your accounting and bookkeeping services done for 20, 15, even as low as ten cents on the dollar, then this article will show you how.

Check this out:

Although most people don’t know it, there is a billion dollar worldwide industry called the barter or “trade” industry.

And in this industry there are a bunch of barter e that act sort of as buying clubs—where thousands of different businesses join and do business with each other using not regular money but “trade” dollars. Trade dollars are currency—just like the dollar in your pocket is currency—but it can only be spent within that barter company.

It’s sort of like a big Monopoly game.

In Monopoly you have different bills ranging from $1 to $500. But those bills are only valuable in the game. Outside the game they are worthless. And the same goes with trade dollars. They can be used just like cash, but only with the businesses in the barter exchange.

Now, almost every single kind of business you can think of can be found in these exchanges—including bookkeepers, accountants and tax professionals. And a few years back I discovered a secret “loophole” in the barter industry that lets you buy any of the thousands of products and services—especially accounting and bookkeeping—sold on trade for as little as 20, 15 even 10 cents on the dollar of “real” money.

Here’s how:

What most people in the trade industry don’t think about is trade dollars are not as easy to spend as regular dollars. And many businesses in barter end up accumulating thousands of trade dollars they are either too busy or too lazy to spend. Which means it is basically as worthless to them as Monopoly money.

Remember, it’s not like regular money you can spend anywhere. You can only spend trade dollars within the exchange.

And you can get tens of thousands of dollars worth of accounting and bookkeeping services for yourself and your business for mere pennies…simply contacting people with excess trade money, and offering to buy their “trade” dollars with regular dollars—and at a steep discount.

Let me give you a “real life” example.

Just last year I owed my accountant $3,000 for doing my taxes.

Since my accountant is in a barter exchange, I simply found someone with $3,000 in excess trade money and, in less than ten minutes, bought all $3,000 of their trade dollars for just $600 cash.

That’s a full $2,400 in savings.

I do this every single year. And save hundreds—if not thousands—of dollars.

And you can do the same thing.

Simply look at the list of accountants, bookkeepers, CPA’s and other tax professionals in the exchange (the big ones have dozens of these types of businesses), see what they charge, and then find another business in the same exchange with excess trade dollars and offer to buy their excess trade dollars for 20, 15, even as little as ten cents on the dollar.

In other words, if someone has $5,000 in excess trade, tell them you will buy it from them for $500 in real cash—or ten cents on the dollar.

Believe me, some companies have so much trade money they have no idea what to do with it. And they know it’s all but worthless if they can’t spend it all. Which is why many of them will almost always agree to sell their trade at a steep discount for real cash.

Pretty amazing, isn’t it?

If you spend a lot of money on accounting related services you will save a fortune with this secret—especially at tax time.

Michael Senoff
http://www.articlesbase.com/advice-articles/get-your-accounting-and-bookkeeping-done-for-90-off-with-this-secret-economic-loophole-62634.html

Effectively managing the cash flow of your business is really about protecting your bottom line. Turning a profit is great but only if you see the cold hard cash that those paper profits are supposed to be bringing in. If to many customers fail to pay you or pay you late on a consistent basis then your business could land itself in serious trouble without you being aware of how bad the downward spiral really was.

Forward thinking entrepreneurs are acting to protect and even grow their businesses. But this means they are protecting their greatest asset. Cash in the bank. Successful entrepreneurs and growth businesses understand that there is a need especially in rough economic times to protect what they have. Otherwise they may find themselves turning a good profit on their goods or services, but they simply don’t get enough money in quickly enough to cover all the money going out of the business to pay for materials, stock, staff and all the other costs of running the business.

The flow of cash into and out of your business is of even greater concern to start up businesses as they are in the position of having to also grow a customer base. This means that a great deal more money will be going out the door than is coming in. With the economy being the way it is, managing and monitoring cash flow is definitely a priority for any business because you don’t know what’s coming in the door at any given time. You can find your cash levels fluctuating wildly.

The key to managing your cash levels is not to let your debtors get out of hand. Understand your monthly income and expenses. Learn to anticipate and avoid cash problems. Discuss with your banker our accountant how to build working capital reserves. A company may have excess cash but be unprofitable. A company may be profitable but lack cash. You want to be profitable and have that cash as well.

The Solution is to keep cash flow plans up to date. Make sure cash flow plans are realistic. Allow headroom in your cash requirements to counter unexpected variances. Be aware of your current cash position, forecasts and bear in mind potential fluctuations. Closely manage your stock and debtors to minimize needs for working capital. And manage your supply chain to gain maximum credit. Talk to creditors early if you need to extend. The bottom line is that you need to control your cash flow and not be at its mercy.

Cash Miller
http://www.articlesbase.com/business-articles/manage-your-cash-flow-or-perish-700136.html

Like most other industries, life insurance companies have created a major presence online, and consumers are the ones who benefit the most. You can now do most of the research online when you are looking for life insurance quotes.

The first step is to decide what type of life insurance you are looking for. Next, you’ll need to seek no-obligation quotes from several companies that offer exactly what you are looking for. The premiums will often vary significantly from one company to another, so a ittle research can end up saving you a lot of money,

Here are a few helpful suggestions to assist you with your online life insurance research:

• Make sure that you get the right information about various life insurance categories. For example, whether it is temporary or permanent, either short term or long term, and is clear about it. Do they have comparable features and rates which will help you determine the right life insurance that is compatible with your needs.

• Are they helpful in guiding you towards finding what you need? This is when you need to evaluate their customer service standards. Also, are they industry accredited? How many years have they been in business?

• They should provide clear, straightforward explanations of their products to assist your decision, and not have a long and confusing document full of fine print, that conceals information about the policy that you need to know.
• Any company that requests private financial information should ensure that all the information you have provided is safely protected, both during the transmission of the information over the internet, as well as the following days, weeks, and months that the company retains this information. Be certain that it is used only for providing your quote and is never shared with a third party.

• All reputable companies have permanently available internet information services, toll free numbers to call, and preferably sign up services available online as well. The best ones even have live human customer service representatives to speak to when you call, rather than a computerized menu of selections and pre-recorded messages.

Life insurance can be a complex subject for most people. Here are a few tips to help ensure that you end up with the policy that fits with your particular needs:

• You should have a thorough review of your life insurance policy regularly, especially if you have sudden changes in personal conditions, health and your financial matters. Your CPA (certified public accountant) is an ideal candidate to assist with this review.

• Joint policies can be tricky, and are not advised. There are several strong reasons to keep policies separate. The insured should never be the owner of the policy. The wife should own the policy on her husband, and the husband should own the policy on his wife. The reason is that when one dies, proceeds from the life insurance policy pass into estate of the deceased, if the deceased was the owner of the policy. In this instance, the survivor does not receive the life insurance check directly and immediately. It goes into the estate and must go through probate. Unfortunately, attorneys take more than their fair share during the probate process, reducing the amount of money that loved ones receive upon death. And all of this can be avoided with one simple step: the insured should not own the policy. The loved one who is to receive the proceeds should own the policy. Incredibly simple, but also incredibly important.

• Check into the usefulness of a critical illness policy as well. It is usually much less expensive to combine critical illness with your life policy, than adding it on later. Illness can often be as financially debilitating as death.

• Be aware of the tax relief incentives, but don’t let the tax benefits distract you from the reason for actually having a life policy. First and foremost, life insurance is to protect your family in a time of need, and any tax benefits should be treated purely as a secondary bonus.

• Always ensure that you policy is worded so that the benefits go directly to the beneficiaries and not to your estate. The tax benefits are significant, no to mention avoiding the delays that could occur in the probate process. The simple step to achieve this has already been mentioned, but is worth repeating: the loved ones should own the policy on the insured. The person insured should never own the policy on himself, as this send the proceeds into the estate and the probate system upon death.

• It is highly recommended that you talk to an independent adviser, such as your CPA, to ensure you are purchasing the right policy at the right price to adequately protect your family.

Remember that not all insurance companies online are totally ethical, and to be very wary of any offer that looks too good to be true. Some simple research with the Better Business Bureau, your state’s insurance commissioner, and the attorney general’s office will soon tell you whether you are dealing with a reputable life insurance company or not.

Greg Roy
http://www.articlesbase.com/finance-articles/tips-when-buying-life-insurance-56847.html

http://www.integrityfinancialpartners.com
For help with your tax return preparation in New York City this season visit Integrity Financial Partners. File your 1040 with a New York City CPA firm. Accounting and tax filing help for professionals and small business accounts. Use an accountant in New York with CPA designation at Integrity Financial Partners. CPA serving Manhattan, Brooklyn, Bronx, Staten Island, NYC and elsewhere.
501 Fifth Avenue, Suite 411
New York, NY 10017
(646) 435-1506

www.integrityfinancialpartners.com

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As selling ad space becomes a little harder in this environment, your clients are demanding more and more PROOF that advertising with you will bring them the results they need.

The proof which successful ad sales people offer is NOT a LOGICAL proof.

It’s an ‘emotional’ proof — the kind which encourages the client to ACT — and book an advert with you.

You ‘prove’ your claim to be able to rescue your client in two ways:

1. You paint ‘word pictures’ of the successful place your client will be AFTER their advert has appeared.

2. You show TESTIMONIALS and TELL STORIES about the success that OTHER ADVERTISERS (who are just like your client) have enjoyed …. after they advertised with you.

You DON’T try to construct a logical argument based on your ‘reach and frequency’ figures, number of eyeballs that will see the ad, or the cost of the ad divided by the number of viewers.

Why? Because your client can ARGUE with your figures, and demean them. How can they argue with a testimonial or true story?

You DO talk about your figures, but only as some data to back up your success stories and testimonials.

AND you NEVER promise that your client will sell $XXX of goods from their advert — you have no control over the offer they are making or the effectiveness of THEIR ad design.

Instead, you take their brains to a ‘happy’ place. A place where they want to be. You tempt them by showing them a prosperous, secure future ….. after they have advertised with you.

TESTIMONIALS Testimonials are really only referrals which have been recorded. They are one of the most potent tools in your sales toolbag. You can never have too many.

How do you get a steady stream of testimonials? BY ASKING. The BEST time to ask is just after the advert has appeared (before the results are known).

The next best time is 3 weeks later — after the results are known. [Expect to get better QUALITY testimonials from the advertisers who are happy with their results -- but expect far FEWER testimonials].

To get good testimonials you have to:

1. Make it EASY for your client to give you one.

2. CONTROL the content.

You do this by calling the client on the phone and interviewing them. You record the interview into a tape recorder, then extract THE GOOD BITS from the interview and put them in a letter. For the client to sign. The best way is to send a hard copy of the letter (on your headed notepaper) together with a floppy disk (or email) so that the client can easily reprint the letter on THEIR notepaper.

When you send them the letter to sign, ALSO send them at least FIVE names of people who are likely to want THEIR goods or services.

You give them 5 leads to help them and to make them feel (slightly) OBLIGATED to sign the letter you send them.

Once you have each testimonial you can photocopy it and use it again and again, as often as you like.

Dan Kennedy is a direct mail marketing expert and consultant. When he is chasing a large consulting job which he believes he can win, he has his secretary send out a BOX of 500 testimonial letters to the client.

Nothing else.

He allows his satisfied customers to make his pitch for him. It probably costs about $30 to copy and send this box, but it often produces a consulting contract for several thousand dollars. This is an idea well worth copying if you’re chasing a client for a big contract.

You don’t have 500 testimonials? Then it’s time to get on the phone with a tape recorder and start interviewing your present clients ….

STORIES Everybody loves to hear a story.

You ‘prove’ that advertising with you works by telling your client stories about the success other clients (just like them) have had when they advertised with you. You need to tell each client between 5 and 10 stories. You overwhelm them with success stories (most people are usually overwhelmed by the tenth)

But that means you probably need about 50 different stories. Each story is about how ‘So-and-so’ was struggling until they advertised with you …. then Hooray! Everything became wonderful!

You need to have a set of stories to sell store owners, another set to sell professionals such as lawyers and accountants, another set to sell high tech companies, and another set to sell trades people.

Why? Because if a lawyer hears 6 stories about the wonderful things that happened to a plumber, an electrician, a builder, a landscape gardener etc. she’ll say to herself: “But these people are nothing like me. So they had success. So what?”

So you need a COLLECTION of stories for each group of people you sell to. (You don’t need 10 lawyer stories. You can tell a lawyer a couple of lawyer stories, a couple of accountant stories, a couple of bank stories etc.)

What happens if you are new and don’t have any stories of your own?

Use other people’s. Use stories from your colleagues clients, or use stories from other publications and advertising vehicles. These are not as strong as your own, but they are still better than getting into a discussion about ‘cost per viewer’.

You: “When XXX advertised to this same market, using an advertising opportunity JUST LIKE THE ONE we are discussing here today, then they had an OUTSTANDING result. What happened was this ….”

The PURPOSE of both these ‘proofs’ is to take your client’s mind and emotions to a place where they feel safe, secure, and excited by the possibilities which await them if they go through the door you are holding open for them.

Once they can ’see’ their successful future …. THEN you give them the logical facts and figures to JUSTIFY the decision to book an advert. You tell them about reach and frequency, market penetration and all the other numbers they want to hear (but don’t understand anyway).

First you make them WANT to book an advert with your ‘proof’ — then you allow them to defend that decision with the ‘facts and figures’.

Roy Preece
http://www.articlesbase.com/business-articles/using-emotional-proof-673882.html

When you ask people to give you a list of exciting careers, accounting is never near the top. The accounting career field tends to draw the sedentary folks: steady, analytical types who value security above all else. You’re basically there to keep the wheels of business turning; a plumber directing the flow of money instead of water.

However, the growing shape of the global business market and the scandals wracking the business world have highlighted the increasing need for a rare breed of accountant; the forensic accountant is either an internal or external auditor who is brought in to investigate the scene of a fraud, bankruptcy, securities scandal, or other conflicted situation and prepare a report identifying what happened. It is called a forensic function primarily because it’s results can be used in a court of law.

What’s the job like?

There are actually many scenarios in which a forensic accountant might be needed: disputes and litigation, insurance claims, personal injury claims, construction audits, insurance fraud, royalty audits, or Wall Street scandals are some of the specialties in this field. Most accounting firms have a cabinet of forensic accounting specialists. These people are sent in the aftermath of a fraud to assess if the numbers in the books reflect reality, and if not, then identify what’s really going on.

A forensic accountant does not have the luxury of being able to disregard anything that doesn’t happen on a spreadsheet. They have to take the big picture into account, dealing with the whole reality of the business situation. A forensic accounting procedure will usually include investigating and analyzing financial evidence, using computerized applications to present the financial evidence, delivering the findings in the form of reports, collecting and exhibiting documents, and perhaps testifying in court as an expert witness. In addition to knowledge of accounting, a forensic accountant must also be familiar with legal concepts and procedures.

The two sides of forensic accounting – investigation and litigation support, break down into several smaller steps:

In the investigation, you might review the situation and suggest possible courses of action, assist with the protection and recovery of assets, and work hand-in-hand with private investigators, forensic document examiners, and consultants. People may lie. The books may be cooked. Keep your eyes open!

During litigation support, you may be responsible for providing the documentation necessary to support or refute a claim, presenting the initial assessment of the case identifying areas of loss, assisting with the examination for discovery, reviewing the testimony, reviewing the opposing expert’s report, and assist with the settlement discussions and negotiations. Attorneys and witnesses may contradict you. You might have to keep digging deeper into a cover-up. Most of all, you will have to convince one judge and twelve jurors that you’re the right person to be testifying about the case.

By no means are forensic accountants confined to an office or a courtroom. There are a wide range of industries which retain the services of a forensic accountant. Matrimonial disputes, in which a divorce proceeding needs mediation to verify the state of disputed assets, is one area you might not expect. Other scenarios might be investigating claims of business negligence, or personal injury claims.

Business economic loss investigations might cover expropriations, product liability claims, trademark and patent infringements and losses stemming from a breach of a non-competition agreement. The growing technology industry is an example of an expanding need for services relating to product liability claims and patent infringements. It’s easy to show whether or not a car’s defects could lead to an accident, but how would you prove that the bugs in a computer operating system led to the loss of assets when the business which used it was hacked? It’s easy to show that a competitor copied your patented design for your camera, but how exactly do you defend a patent on a cursor?

A forensic accountant combines the skills of a record-keeper, paralegal, and a detective rolled into one. To be good at it, you have to have a good dose of curiosity, persistence, creativity, and discretion. You’ll need sound professional judgment and confidence that you know your job so well that your knowledge and discoveries will stand up under cross-examination. Companies will live or die and defendants may go to prison based on the work that you do, so you are challenged to be at your best. It is the most challenging of accounting careers.

Some facts about Business Fraud Detection:

Small businesses are the most vulnerable to occupational fraud and abuse. Larger businesses will have a broad number of employees preventing losses and performing internal audits, while smaller companies are more trusting of their own employees.

Surprisingly, the average fraud at a small company nets more money than the average fraud at a large company! This is due to the fact that there are fewer people watching and less control over who has access to the bookkeeping. Put yourself in the place of a start-up entrepreneur: Starting your own business already requires you to work so hard that you might as well be three people already. You won’t have the time to check up on every action of everybody you hire when your business is small. You have no choice but to start out with a handful of people you trust, and hope you can go on trusting them!

Companies with fraud hotlines or other ways to report anonymous tips tend to cut their fraud losses by a flat fifty percent. And more frauds are uncovered by anonymous tips than any other source. As a fraud investigation accountant, you may have to rely on the occasional “deep throat”. If you have someone tipping you off to a shady practice, you will need to be sure that the information is detailed enough to give you a good lead.

Losses due to an employed perpetrator aged 50 and above are usually much higher than the losses caused by an employee in their 20’s or 30’s. This is obvious considering that older employees have obtained a higher level of trust and responsibility within a company. In addition, an employee nearing retirement feels that they have less risk, since they may be out the door by the time their fraud is discovered.

Good luck on the job, Columbo!

Josh Stone
http://www.articlesbase.com/careers-articles/forensic-accounting-the-detective-breed-of-accounting-careers-70255.html