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During the years in issue, Dix Scrap purchased scrap metal
belonging to Simco as follows, with all payments in cash made
directly to John, which he retained:
Period relating Total number of
to Simco’s year Total amount separate sales
July 1, 1989 - $62,699 63
June 30, 1990
July 1, 1990 - 80,589 106
June 30, 1991
July 1, 1991 - 33,870 60
Dec. 31, 1991
Period relating
to John’s year Total amount
July 1, 1989 - $21,258
Dec. 31, 1989
Jan. 1, 1990 - 79,351
Dec. 31, 1990
Jan. 1, 1991 - 76,550
Dec. 31, 1991
Neal’s Discovery of the Scrap Metal Sales
Simco’s accountant was Wayne Boyer. Mr. Boyer prepared
Simco’s, as well as John’s and Neal’s, tax returns and kept
Simco’s books. However, Mr. Boyer was not a certified public
accountant. Thus, once a year, Mr. Boyer would ask another
accounting firm to do a review and compilation of Simco’s books.3
3 A compilation involves putting a business’ financial
information into a financial statement format. A review involves
analytical procedures, such as comparisons of financial ratios,
(continued...)
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