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Case Research Of Green Lawn Lawn Care

Wants to include business to benefit from tax advantages of operating a company as a firm (wants to learn advantages)

Leah contains 60% of stocks of Green, children possesses the rest

Wants to keep an eye on business properly to make better day-to-day decisions


February 2004 - Leah purchased possessions & customer list of another lawn care and attention services

Spring 2004 - Green provides full selection of yard & garden treatment services to residences

5 crews of staff serving 250 homeowners

Crew leader - has trained in lawn care and attention & gardening & is in charge of supervising assistant (3 chosen from lawn attention company Leah purchased + 2 new)

Each crew runs separately & has a pick-up pick up truck & all necessary equipment

Lawn good care season = 7 months long & customer must sign up for entire season

Offers # of different yard & garden offer (avg monthly income each customer = 300)

Services: regular services + one-time careers w/ additional charges

Increasing demand purchased new pick up truck for 5th staff & additional equipment

Operating decisions made by Leah


Leah not taking salary from Green but paying dividends to pay relative (each member in lower tax bracket)

Sons John have a few hours/ week to provide for a few of Greens' accounting & settle payments (will get salary of 4, 200/ month), remaining time look after sons (aged 3 and 13)

10 hourly utilized employees in crew of 2 (paid @ end of every week)

Assistants paid min wage (high turnover), w/contains income tax, EI, CPP

Employees report time worked well to Green


Large levels of resources to meet needs of customers

Purchase new yard mower & large equip (occasionally)

Leah does buys to keep control of buying function

Each week Leah distributes supplies necessary for the week to each staff (if crew runs short of materials, Leah offers more and sometimes team buy things if Leah can't deliver quickly enough post receipt to Leah for reimbursement)

Leah's buys paid w/ personal mastercard (every month go through declaration to recognize business related expenditure)

Saves receipt for business-related purchases (if she has it) and stores it individually from

Crew leaders keep trucks and are permitted to use trucks in my opinion (these are responsible to power the pickup trucks & bring them for maintenance)

Crew leaders supplied with gas company mastercard for gas purchases

Leah made design w/ 2 local garages to do fixes (invoice Green immediately for work done)

Crew leader in charge of costs on vehicles for personal use

Record keeping

Accounting information looked after on Leah's 5 calendar year old personal home computer

Used to keep info using spreadsheet & manual records

Still records cash gathered & expenditures on spreadsheet & helps to keep a card for every customer (record services packages purchased and pmts received)

Lost track of some pmts received & paid invoices for expenses

Leah's computer contaminated w/ virus & hard drive failed (struggling to be retrieved)

One employee strategy her & offered custom designed system w/ a continuing maintenance agreement @ cost of 10, 000

Green's office in Bessner's basement w/ computer, documents, other records

Monitoring field activities

Difficulty monitoring hours each team work, how hard they work, quality of work done

Supplied cell phones to each crew so she can contact them on job

Plans to incorporate new company for snow removal business (take advantage of low rate small business corporations)

Business advices

Objective: Wants to keep an eye on business properly to make smarter day-to-day decisions

Difficulty making sure employees report genuine hours did the trick (encouraged to report more time since paid hourly) recommend turning to salaries instead of hourly wage

High turnover might not be best for Green because new employees are low in output (need to adapt to role and environment) signal deals with employees

Should have an improved channel for the crews to acquire supplies other than trying to deliver supplies when they are brief or get them if Leah cannot deliver quickly (inefficient)

Inefficiency and inaccuracy if use personal visa or mastercard to pay business-related purchases (may include/exclude personal purchases and frustrating) create business bank card and only purchase business-related buys with business visa or mastercard and personal purchase with personal credit card

Many issues with record keeping:

Information taken care of using spreadsheet and manual data (issues with data integrity - completeness and accuracy)

Record cash accumulated and expenses on spreadsheet (input errors less inclined to be trapped by spreadsheet, no gain access to control)

Recommendation: purchase accounting software to keep track of revenue and expenditures with input control buttons to ensure data integrity & access secuirty

Computer infected with virus perform daily backups on separate drive, install anti-virus software and create firewall

Come up with disaster restoration program since all files and documents of Green positioned in Bessner's basement

Should not accept employee's offer of custom designed system with ongoing maintenance contract because unsure if screening done, system designed appropriately should work with professional consultant

To ensure quality work is capable of doing customer satisfaction surveys

Performance reviews to determine how employees are undertaking relative to one another

Design motivation programs to encourage employees to work hard

Do not allow crew to use trucks for personal use because employees have gas company credit card in which gas for personal use are incurred to Green

Tax advices

Objective: Wants to incorporate business to reap the benefits of tax features of operating a company as a firm (wants to learn advantages)

Cannot take advantage of low income mounting brackets by owning only 60% and having children own left over 40% because children are just aged 3 and 13 (income of minors would be attributed back again to Leah and taxed at higher duty bracket)

Customer list bought can be capitalized as eligible capital property

Capitalize instruments and vehicles (can declare CCA on depreciable properties)

Dividends paid to minors remain attributed back again to Leah

Deductibility of employees wages since withheld taxes, EI, CPP

Incorporating distinct company for snow removal business will break up income but small company deductions will still be distributed among both businesses because they will be related (both held by Leah)

Campbell's Toy Store

Case facts

Role: Auditor of Campbell's Toy Store (CTS) CA of Filmore & Gus

Client: Campbell's Toy Store (CTS)

Local retail procedure w/ season end of Feb 28

Gina Cooper - Controller of CTS

January 1992 - completed inventory count up and inner control testing without any issues

March 2, 1992 - Controller explains virus incident before 12 months end:

Lost control of microcomputer system temporarily

February 14, 1992 noon - someone presented a computer virus into system that influenced every program in network (no way of knowing what program performed)

Unauthorized program can transform data in computer, erase documents, cause standard damage

Doesn't understand how virus got into the machine (could have been came into by employees participating in a tale or someone breaking into computer through modem gain access to, or could attended in through purchased programs we use)

Spend a lot of time & money to try to remove program and appear to possess succeeded


Memo to audit partner discussing auditing implications of event

Recommend controls that might be instituted to avoid viruses from coming into CTS' computer system in the future

Audit implications

Cannot count on previous internal control testing

Issues with data integrity

Completeness of data on computer system (difficulty in accomplishing audit path)

Accuracy of data (data might have been manipulated by virus)

Validity of data (data may be added or duplicated without authorization)

Request for back-ups done before virus invaded CTS' computer system

Substantive way but rely on evidences provided by third functions (vendors, suppliers, finance institutions)

High risk client

Determine if CTS' anti-virus software is executed correctly

Adequacy of regulations with regards to internet usage and code of carry out (inner control)

Possibility of fraudulence and disruption to disrupt data files and proof fraud

Recommended controls to avoid viruses

Implementation of anti-virus and other security software (perform daily trojan and spyware and adware scans)

Ensure on-site and off-site backups of data done (ensure there is firewall)

Ensure security of access (passwords) and physical investments (pcs)

Scan any devices that are attached to the computers

High security handles to ensure employees cannot browse personal websites which may contain virus

Implement internet plan to ensure proper use of CTS' internet use and code of conduct

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