At nearly sixty I had no idea what a CPA actually did. I learned basic bookkeeping in 1963 and used those skills, off and on, for many years in a number of different jobs. But a CPA? To me that was just a glorified bookkeeper. I only know two CPAs personally and they are both crooked as heck. They seem to use their title as a way to charge higher fees to act above the law.
About the first I can only write in generalities. He regularly hid receipts in his own business so they wouldn't have to be reported as income and he paid people in cash so he didn't have to pay employment taxes. I have vague recollections of other practices that might be considered illegal or, at least, unprofessional and unethical.
In preparation for discussing the second CPA, let me give you some background information. In 1999 I was really in need of work and started with this small mortgage brokerage primarily as their telephone and computer technician. The boss found out that I knew something about bookkeeping and turned over to me the QuickBooks file and I found myself the bookkeeper for the company.
As just a worker bee in a small company I never begrudged my boss the fact that he was living very well and I was just barely squeaking by.
He owned a horse. All the stabling fees were paid by the corporation as rent and all the veterinary bills were paid by the corporation as medical expenses. The trainer was paid by the corporation and charged off as consulting fees or automobile expenses.
He also owned a boat. The slip fees were charged off as rent and all the maintenance was covered under automobile expenses.
Neither the horse nor the boat was corporate property so these expenses could not be considered business expenses. To the best of my knowledge he never had a party on the boat to which he invited clients and he never allowed clients to ride his horse. Thus it would seem the total amounts paid were income for him and unreported to the IRS. This is only conjecture on my part.
His monthly car payments and maintenance expenses were paid by the corporation. The monthly insurance payments were also paid by the corporation and charged off as automobile expenses. None of his cars were ever brought in as corporate assets so these payments all represented unreported income for him.
His home rent was paid by the corporation. His phone, electric, water, trash, and gas were paid by the corporation as corporate expenses. His home association fees were paid by the corporation as building maintenance. None of these were ever reported to the IRS as income.
He claims to have been audited three times by the IRS and twice by HUD, so possibly these income questions have already been addressed. This treatise, however, is not about him, but the corporation's CPA.
The aforementioned were intended merely as an introduction to our accountant, Rxxxxx Lxxxx Dxxxxx, a licensed California CPA, license number 6xxxx (see editorial note at the end). Each year, in order to be certified by HUD, we had to submit audited financials along with our application and the boss retained Dxxxxx to conduct those audits. In all the years we were HUD certified and I was with the company, Dxxxxx never once conducted what I would consider to be an actual audit. He prepared all the HUD required documentation without looking at any of the accounting procedures we followed or any of the supporting paperwork.
His audit consisted of having me send him a trial balance, printed out from QuickBooks, then having me adjust various amounts so certain ratios were not too high. The only paperwork he looked at was the trial balance I sent him and the bank statements with associated cancelled checks. Never once did he ask to see any bills or invoices.
Was he aware that the financials he was preparing for HUD were inaccurate and (in my opinion) fraudulent? Consider these two points. First, one year my boss was thinking about bringing his boat into the corporation as an asset so he had me carry all the expenses honestly as “boat expense.” For whatever reason, at the end of the fiscal year, we had not made the boat a corporate asset so Dxxxxx told me to change all the “boat expenses” to “automobile expenses” and resubmit the trial balance. The second point is that in 2001 our accounts payable were around $22,000 and Dxxxxx said that was too high. The solution? He had me simply delete bills from the books to lower the payables to around $5,200 and resubmit the trial balance.
HUD required that the audit be conducted by an independent CPA. That implies one who is, although paid by the company, working on behalf of the U.S. Government to ensure compliance with “generally accepted accounting principles.” In two years (2000 and 2001) he was paid $4,700 for the preparation of two reports that were used to secure HUD certification for the company. This was in addition to the fees paid to him for the preparation of the corporate tax returns and the boss's personal tax returns.
