6.59 Forensic Accounting: Assurance Engagement 2: Net Worth Analysis. You can use the computer-based Electronic Workpapers on the textbook website to prepare the net woni analysis required in this problem. Net worth analysis is performed when fraud has been discovered or is strongly suspectel and the information to calculate a suspect's net worth can be obtained (e.g., asset and liabi ity records, bank accounts). The procedure used is to calculate the person's change in ne worth (excluding changes in market values of assets) and to identify the known sources of funds to finance the changes. Any difference between the change in net worth and the known sources of funds is called funds from unknown sources, which might include ill- gotten gains. Nero has worked for Bonne Consulting Group (BCG) as the executive secretary for administration for nearly 10 years. Her dedication has earned her a reputation as an out standing employee and has resulted in increasing responsibilities. Nero is also a suspect in a fraud. During Nero's first five years of employment, BCG subcontracted all of its feasibility and marketing studies through Jackson & Company. This relationship was terminated because Jackson & Company merged with a larger, more expensive consulting group. At the time of termination, Nero and her supervisor were forced to select a new firm to conduct BCG's market research. However, Nero never informed the accounting department that the Jackson & Company account had been closed. Because her supervisor allowed Nero to sign the payment voucher for services rendered, she was able to continue to process checks made payable to Jackson's account. Nero was trusted to be the only signature required to authorize payments less than $10.000. The accounting department continued to write the checks and Nero took responsibility for deliv- ering the checks. She opened a bank account in a nearby city under the name of Jackson & Company, where she made the deposits Nero's financial records have been obtained by subpoena. Exhibit 6.59.1 provides a sum- mary of the data obtained from her records Year 1 Year 2 Year 3 $100.000 30.000 20.000 50.000 6,000 $100,000 30.000 20.000 50,000 12.000 $100,000 42,000 40,000 50,000 14,000 50.000 Assets: Residence Stocks and bonds Automobiles Certificate of deposit Cash Liabilities: Mortgage balance Auto loan Income: Salary Other Expenses: Scheduled mortgage payments Auto loan payments Other living expenses 90.000 10,000 34.000 6,000 36.000 6.000 6,000 6,000 4800 20.000 22.000 Required: You have been hired to estimate the amount of loss by estimating Nero's "funds from unknown sources that financed her comfortable life style. (Hint: Set up a working paper like the following: End Year 1 End Year 2 End Year 3 Assets list) Liabilities ist Net worth difference) Change in net worth Add total expenses - Change plus expenses Subtract known income Funds from unknown sources