6. Management can bleed the company or engage in non-arms-length transactions with owners.
Both owners are paying their spouses exorbitant salaries and have extravagant expense accounts and perks.
Buildings, equipment, and furnishings could be purchased from/by the owners at inflated or deflated prices.
This is not fraud, as long as what occurs is reported properly for tax purposes and financial statement given to the bank properly disclose any needed items.
It is fraud if one owner authorizes payments, perks, or non-arms length transactions to himself or his family that the other partner is not aware of.
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Company perpetually short of cash
Expense accounts and perks unusually high
Inflated salary expenses
Abnormally high prices for the assets purchased.
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No apparent controls to prevent one owner from defrauding the other owner.
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7. Customers can use photo coupons without completing their payments. There are no controls to prevent customers who have stopped paying on their note from taking their coupon to their photographer for a sitting and getting their picture taken.
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Increase in the number of sittings per current customer.
Coupons submitted for customers that have been written off.
Photographer complaints.
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Photographers are not required to verify if customers are current before a sitting.
Customer given all their coupons at initial purchase.
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Set up automatic withdrawals from checking accounts or automatic charges to credit cards.
Require photographers to verify that customers are current before each sitting.
Keep a list of customer payments; do not pay for customers that are no longer current.
Do credit checks on all potential customers.
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