questions to answer with explanation: 1. How should the compliance or lack of compliance with government regulations (such as filing of a W-2 or 1099 for the president of the company) be addressed ?????

2. What if management doesn't comply???

3. Should legal counsel be hired ? Is a forensic accountant required ???

The client, Bcb Mitchel l, held construction company, Acme Construction. Annually you prepaze Bob's individual return, which inciudes a K from his company' s Form 1120S. You have no responsibilities related to Acne Construction and have never seen any records other than the annual K-1 and w-2 Bob receives as an Acme employee the preparation of his individuai return, you have not been nvolved in Bob's financia affairs is a ninority sharehoider in a closely Bob receives as an Acme employee. Aside frou Bob sets up an appcintment with you to discuss a recent situaticn with his company. Bob tells you that all sharehclders in the company are related parties except for himself, and he was asked to join as an investor due to his extensive experience and saies Dase. ihen you talk to him before the appvintment, he says that he majority shareholder called a meeting recent ly, requesting a S10, C00 contribu:icn from each sharehoider, indicating extensive cash fiow pretlems and an inability to meet payreit requirements. He expresses extreme cubt s he knows sales are strong, and to his knowiedge there are no large receivabies outstanding. Bob is responsibie fo: conpany sales and operaticns. Family egal deelings. ob has limited exper ience witli the members, borh shareholcers and non-sharehoiaers, conduct acdministiarive and tasiness matters includirg accounting and aiministrarive sice of the business, and atter ten years he hs stayed out of any n.d lia genert Issues htcording to Bob, any requests tor financial iniormation were discouraged by the ma jerity sharehoicer /cresider: of the compary. You ask him to piovide ycu with prio: years' irancial iniermatin icluding tax When Bob arrives for his appoincment, he doesn't have any of the information requested. His request to the majority sharehoiders was denied, and he was told that his job was to "manage the construction sites, ot the company business tone of this statement, you ask further questions about suspicious activity. Bob telis you that the majority sharebolders consist of four family members owning eighty-five percent. Bob's share is fifteen percent. The majority shareholder whe serves es presideit of Acme is employed fuil tine eisewhere, but his immediate family members run office operations. His wife, one of the shareholders, is "CFO" Specific details from Bob include the following: Most of the office employees are family members: The majority shereholders' parents aze enployed as well as the majority shareholders' college-aged children (during their holiday breaks aid summez Fanily members work inconsistently throughout the week, and bob has observed that persenai chores are frequertly perfcrmed at the office curing business hcurs The majority shareholder, empicyed fulltime at arnother company, draws a rather large salary, explaining to Bcb that he works in Acme management as needed during the day, ad alsc during the and each weekend evngs aily member employees each appear tc have receive a cell phone and automobile paid for by the company Operations are run from a business locatior that inclades storage for equipment and constructicn aventory, where compa:ny trucks are rked and employees meet caily before going to iob Construcrio project mnageis ae providec office space, and there are several empty offices. sna:1 break rcom is available. The land and Luiiding used fur operations is ownea by the majority shareholder sit.es. off 1 / duur; i strative located separate site in a faniiy member's srare bedrocm 2tie operations at are a presunabty for convenience) Fob asks you ro assist with investigaring the cash flow issue, Le's ccncerncd that he doesn't have any rights to acces, the accounting records. At ycur request, Bob calls the tax preparer irect ly and copies cf the prior three years returns are e miec As Bok: leaves, you provide him with a copy of the state's laws related to minority shareholder rights, including an expianation of the laws aqainst minority shareholder oppression Eob pjans to contact the majority shareholder to request accounting records given this new information When Bob leaves, you examine the S corporat ion tax return ediately seveial areas of concein ppear: *Travel expense for the local company are extensive The cempany has reported a net Joss fo severa years * Consulting feee, found n "other expenses" cn the tax retur, are in excess of $i50, 00c Celi phone charges confirm the mincrity shareholders suspicion as it appears there are nunerous cell phone bijls being paid due to the large doliar anount on other expenses" on the tax return otfice rent is extremely 1arge, in contrast to bob's st tement that the location of business operaions are on property cwned y he majerity shareholder. A online seare oi owner ship records for the count.y confirms this fact Meais and entertainment expenses for the company are arge, as well as donations to charities You call the signing tax preparer, who states that he dces nou review recorcs, but only uses the Acne trial baiance (prepaiea by che majority siatehoudern updates depreedetuni ane nag-a staff member prepare che teturn based on the client's intormation. His roninai invclvenent is done to ensure the client fees are kept to Rcb rer orns the llowing week with electrcnic copies of rhe general ledger and firaneal statene.ls. Ecb and you pull ut- the Suspicions of seif- -rarsact: ors in cuesticnable accoun s, reveang considerable ire nrairy as to The ransactiors reccrde The client, Bcb Mitchel l, held construction company, Acme Construction. Annually you prepaze Bob's individual return, which inciudes a K from his company' s Form 1120S. You have no responsibilities related to Acne Construction and have never seen any records other than the annual K-1 and w-2 Bob receives as an Acme employee the preparation of his individuai return, you have not been nvolved in Bob's financia affairs is a ninority sharehoider in a closely Bob receives as an Acme employee. Aside frou Bob sets up an appcintment with you to discuss a recent situaticn with his company. Bob tells you that all sharehclders in the company are related parties except for himself, and he was asked to join as an investor due to his extensive experience and saies Dase. ihen you talk to him before the appvintment, he says that he majority shareholder called a meeting recent ly, requesting a S10, C00 contribu:icn from each sharehoider, indicating extensive cash fiow pretlems and an inability to meet payreit requirements. He expresses extreme cubt s he knows sales are strong, and to his knowiedge there are no large receivabies outstanding. Bob is responsibie fo: conpany sales and operaticns. Family egal deelings. ob has limited exper ience witli the members, borh shareholcers and non-sharehoiaers, conduct acdministiarive and tasiness matters includirg accounting and aiministrarive sice of the business, and atter ten years he hs stayed out of any n.d lia genert Issues htcording to Bob, any requests tor financial iniormation were discouraged by the ma jerity sharehoicer /cresider: of the compary. You ask him to piovide ycu with prio: years' irancial iniermatin icluding tax When Bob arrives for his appoincment, he doesn't have any of the information requested. His request to the majority sharehoiders was denied, and he was told that his job was to "manage the construction sites, ot the company business tone of this statement, you ask further questions about suspicious activity. Bob telis you that the majority sharebolders consist of four family members owning eighty-five percent. Bob's share is fifteen percent. The majority shareholder whe serves es presideit of Acme is employed fuil tine eisewhere, but his immediate family members run office operations. His wife, one of the shareholders, is "CFO" Specific details from Bob include the following: Most of the office employees are family members: The majority shereholders' parents aze enployed as well as the majority shareholders' college-aged children (during their holiday breaks aid summez Fanily members work inconsistently throughout the week, and bob has observed that persenai chores are frequertly perfcrmed at the office curing business hcurs The majority shareholder, empicyed fulltime at arnother company, draws a rather large salary, explaining to Bcb that he works in Acme management as needed during the day, ad alsc during the and each weekend evngs aily member employees each appear tc have receive a cell phone and automobile paid for by the company Operations are run from a business locatior that inclades storage for equipment and constructicn aventory, where compa:ny trucks are rked and employees meet caily before going to iob Construcrio project mnageis ae providec office space, and there are several empty offices. sna:1 break rcom is available. The land and Luiiding used fur operations is ownea by the majority shareholder sit.es. off 1 / duur; i strative located separate site in a faniiy member's srare bedrocm 2tie operations at are a presunabty for convenience) Fob asks you ro assist with investigaring the cash flow issue, Le's ccncerncd that he doesn't have any rights to acces, the accounting records. At ycur request, Bob calls the tax preparer irect ly and copies cf the prior three years returns are e miec As Bok: leaves, you provide him with a copy of the state's laws related to minority shareholder rights, including an expianation of the laws aqainst minority shareholder oppression Eob pjans to contact the majority shareholder to request accounting records given this new information When Bob leaves, you examine the S corporat ion tax return ediately seveial areas of concein ppear: *Travel expense for the local company are extensive The cempany has reported a net Joss fo severa years * Consulting feee, found n "other expenses" cn the tax retur, are in excess of $i50, 00c Celi phone charges confirm the mincrity shareholders suspicion as it appears there are nunerous cell phone bijls being paid due to the large doliar anount on other expenses" on the tax return otfice rent is extremely 1arge, in contrast to bob's st tement that the location of business operaions are on property cwned y he majerity shareholder. A online seare oi owner ship records for the count.y confirms this fact Meais and entertainment expenses for the company are arge, as well as donations to charities You call the signing tax preparer, who states that he dces nou review recorcs, but only uses the Acne trial baiance (prepaiea by che majority siatehoudern updates depreedetuni ane nag-a staff member prepare che teturn based on the client's intormation. His roninai invclvenent is done to ensure the client fees are kept to Rcb rer orns the llowing week with electrcnic copies of rhe general ledger and firaneal statene.ls. Ecb and you pull ut- the Suspicions of seif- -rarsact: ors in cuesticnable accoun s, reveang considerable ire nrairy as to The ransactiors reccrde