Larry’s Laws of Larceny- Law 11: The Happy Homemaker Knows Nothing About Window Dressing

Larry Beebe, CPA

Window dressing as a technique used by investment advisers to make their investment portfolios look good at the end of an accounting period. The investment adviser accomplishes this by selling securities with large losses just before the accounting period end and replacing them with stocks where cost and market will be similar at the accounting period end. The adviser hopes that the losses will be absorbed in the clients gain and loss on sale of securities account and will not be noticed by the client.

The CPA firm conducting the benefit plant’s annual financial statement audit should notice sales of securities at year end with large losses and show inform the client of the matter.

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