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Financial irregularities often arise in closely-held businesses. When the majority shareholder controls the accounting records, employs family members, and conducts all legal and accounting transactions,
Financial "irregularities" often arise in closely-held businesses. When the majority shareholder controls the accounting records, employs family members, and conducts all legal and accounting transactions, opportunities are abundant for self-dealing and breach of fiduciary duty. Students are placed in the role of an accountant working with a small, closely-held business in tax and financial statement preparation. A client, a minority shareholder in a construction company, engages the accountant after the majority shareholder states that cash flow is weak, salaries must be reduced, and shareholders must make cash contributions to maintain liquidity. The client expresses concerns about the cash flow situation due to his knowledge and experience with recent collections of large accounts receivable, which is contrary to the majority shareholder's claims
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