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DAC, was responsible for the UCI account. Northcutt had been
employed by DAC since 1965 and had handled the UCI account since
UCI began business. Northcutt was a high school and a business
school graduate. She took 32 to 48 hours of continuing education
courses a year that were offered by the International Society of
Public Accountants. Northcutt did not have a public accountant
license. When Northcutt was presented with an accounting issue
about which she was uncertain, she would research the issue
herself and then make a decision as to how she felt the issue
should be treated.
Every month, Jump took UCI ledgers and invoices to
Northcutt. Northcutt would have her clerk prepare monthly
financial statements for UCI based on the ledgers and invoices.
Northcutt reviewed the monthly financial statements after the
clerk completed them and before they were given to UCI.
Because the manufacturing processes used by UCI corroded its
equipment, periodic replacement of the equipment was necessary.
Prior to the years in issue, UCI purchased equipment outright and
depreciated it for tax purposes.
During 1988, Jump was contacted by Equitable Lomas Leasing
Corp. (Lomas), a company that offered leases on equipment that
Jump was interested in purchasing. Lomas told Jump that there
were tax advantages of leasing the equipment instead of
purchasing it. Lomas advised Jump that, if the equipment lease
were for a duration of at least 1 year, the lease would be
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