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Finance & Accounting
Pages 1 (251 words)
The unethical part about this situation is that thought Stan Sewall paid only $50,000/- for the franchisee he has been able to window dress his balance sheet by 10 times without actually investing the funds into the enterprise at all.
The transaction to inflate the value cannot be said to be at arms' length as the parties involved have no real financial stake knowing very well from the beginning that the funds changing hands are in circuitous route and intended to flow back to the original lender. As evaluation of the enterprise is at shored up value the investors and creditors can be harmed. When the law catches up with Stan Sewall, he, the law firm, the third party and the customers would all be harmed for trying their hand at cheating. Per se it would be difficult to catch up with Stan Sewall if the transactions are seen in isolation. Here the fine print of GAAPs & FACBs would need to be invoked to see through this creative set of transactions. Perhaps SOX Audit would help nab the culprit at a nascent stage. ...
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