The Strange Story of the Accounting Firm

SaveSome Corporation

(Vancouver – British Columbia, Canada)

Just a few months ago a very “special” service company was active in Vancouver, the SaveSome Corporation. The Accounting Division of the Company was active since 1998.

This Company was used to declare in its Web Site that "We are professionals and certified CA, CMA and CGA Accountants". See the link:

I made a check about this statement, but none of the British Columbia Accounting Associations recognized the SaveSome Corporation and Mr. Hemin Kadir (its Accountant) as members of their organizations. Was that an unauthorized statement? Apparently it was. Could such an (apparently) unauthorized statement bring to any legal consequences? I do not have any idea about it. But if this statement was not unauthorized, then the problem around this Company would be even more serious, as I am going to demonstrate.

The Accounting Division of this Company prepared the Financial Statements 2000-2001-2002 for a Manufacturing Company incorporated in Vancouver in year 2000. And that is why I am interested in it: this Manufacturing Company had an Italian company as its 50% shareholder. And I am a shareholder of the Italian Company.

This Manufacturing Company incorporated in Vancouver was also one of the so called “Related Companies” of the SaveSome Corporation which prepared its Financial Statements. See the link:

What is the true meaning of “related” for two different companies? Friend to? Close to? What else? Surely not “controlled”. The Manufacturing Company was controlled officially by different shareholders (50% by an Italian Company and 50% by a Korean manager).

And let’s come to the key issue of this story: the 2000-2001-2002 Financial Statements were clearly false. Nethertheless they were approved by the shareholders of the Company in May 2004 as they were reliable Annual Reports for the years 2000-2001-2002. In fact, in July 2003 the Manufacturing Company had been declared “dissolved” by the Ministry of Finance of British Columbia for having failed to file in the previous years. This was confirmed to me in writing by the Minister of Finance of B.C., Honourable Colin Hansen. So, probably for the first time in the story of Canadian corporations, a company “dissolved” in year 2003 approved its past Annual Reports (2000-2001-2002) in year 2004. Fantastic example of juridical creativity!

Were there any additional reasons to conclude that these Annual Reports were clearly false? Yes, there were:

1) most of the figureswere strangely"rounded" at one hundred or one thousand dollars: this happens in business plans not in Annual Reports and not in real accounting;

2) in the calculation of the "cost of goods sold", the Accountantsubtracted the "stock" of inventory and not the "changein inventory" (unbelievable mistake)

3) the amortization cost is missing in year 2001

4) corporate taxes are missing and gross income before taxesis equal to net income after taxes (a true “Paradise”: in British Columbia they do not seem to pay anycorporate taxes)

5) fixed assets net of amortization fluctuate in the years but are the same figures in years 2000 and 2002 (truly unrealistic)

6) ending equity of year x and beginning equity of year x+1 are different (sic!)

7) curiously, the endingcapitals (net equity) at the end of 2000 and 2002 are perfectly equal ($77.579),which, again,is pretty unrealistic.

You can find these “Reports”, signed by Mr. Kadir, here below:

Financial Statements prepared by the Vancouver Accounting Company


which declared that it used certified CA, CMA and CGA accountants.

INCOME STATEMENT

/ 2000 / 2001 / 2002
Revenue / 80.000 / 79.700 / 172.000
Purchases / -14.000 / -18.000 / -35.000
Delivery & Freight / -1.800 / -4.500 / -7.400
Materials & Supplies / -2.500 / -7.500 / -10.000
Subcontractors/Assembly Costs / -8.000 / -12.000 / -14.000
Cost of Goods Sold / -26.300 / -42.000 / -66.400
Less: Inventory / -2.000 / -1.000 / -2.000 / <----
Total Costs of Goods Sold / -24.300 / -41.000 / -64.400
Gross Margin from Sales / 55.700 / 38.700 / 107.600
Accounting & Legal / -900 / -1.500 / -1.600
Advertising & Promotions / -1.800 / -2.400 / -1.800
Amortization / -6.060 / ? / -6.060 / <----
Insurance / -1.540 / -1.540 / -1.540
Courier & Postage / -100
Interest Bank Charges / -800 / -1.125 / -2.800
Repair & Maintenance / -1.600
Office Supplies / -700 / -1.400 / -15.000
Wages & Salaries / -14.000 / -18.000 / -30.000
Rent / -10.200 / -10.200 / -10.200
Telephone / -1.300 / -1.523 / -5.000
Vehicle & Expenses / -4.500 / -4.500 / -7.000
Travel & Entertainment / -7.000
Miscellaneous / -1.100
Total General & Administrative Exp. / -41.800 / -51.988 / -81.000
Net Income/Loss for the Year / 13.900 / -13.288 / 26.600

BALANCE SHEET

/ 2000 / 2001 / 2002
Assets
Cash & Bank / 18.900 / 600 / 16.000
Accounts Receivable / 14.000 / 14.000
Prepaid Expenses & Deposits / 300 / 800 / 300
Inventory / 2.000 / 1.000 / 2.000 / <----
Total Current Assets / 35.200 / 2.400 / 32.300
Office Equipment / 5.000
Office Furniture / 3.000
Vehicle / 15.000
Fixed Assets, Net of Depreciations / 52.379 / 23.000 / 52.379 / <---
Total Assets / 87.579 / 25.400 / 84.679
Liabilities
Accounts Payable / 10.000 / 7.288 / 7.100
Long Term Liabilities / 0 / 0 / 0
Total Liabilities / 10.000 / 7.288 / 7.100
Equity
Capital at Beginning of Year / 63.679 / 31.400 / 50.979 / <----
Net Income for the Year / 13.900 / -13.288 / 26.600
Dividends / 0 / 0 / 0
Capital Increase / 0 / 0 / 0
Capital at End of Year / 77.579 / 18.112 / 77.579 / <----
Total Liabilities & Equity / 87.579 / 25.400 / 84.679

It is evident that thenumbers were purely invented by people with no basicknowledge of accounting and in a great hurry. Were they certified CA, CMA, CGA accountants, as stated in web site of the Save Some Corporation? I do not (can not) think so, but if I am wrong, these Canadian organizations have a reputational problem. On the contrary, if I am right, it means that it is possible to “usurp” an accounting title pretty easily in British Columbia.

It also evident that the Manufacturing Company with the creative Reports never paid corporate taxes in the years 2000-2001-2002-2003-2004 (five years in a row) because the missing of the “corporate tax” heading was a Freudian omission. Will tax evasion bring to any consequences? I do not know. I am frankly curious.

I thought it was an interesting story to tell.

Paolo Sassetti

Post Scriptum – The Annual Reports of the Company and the letter of the Minister of Finance of British Columbia are available on request (a 2,7 MB file).