Entre. Ch. 17
Age discrimination in employment act
1967 An act congress makes it illegal to discriminate against people who are older than 40
Civil Rights Act of 1991
A series of acts by congress that prohibit discrimination on the bases of race color religion sex national origin
Internal Control
A set of rules and procedures that work to limit the opportunity of remployees theft or malfeasance Primary method to ensure honest in employees Matter of establishing policies and procedures that work to make dishonesty difficult and honesty easy Most basic technique is to separate the duties of maintaining the security of assets from the duties of maintain record of those assets Ex: Adverser Possession- Owner of real property does not enforce property rights and allows for non owner to use the property as if it were his or her own Separation of Duties
Separation of Duties
A type of internal control that separates the physical control of an asset from the persona accounting for that asset
Credit Insurance
Abnormal losses from credit customer not paying their bills requires the merchant to provide insurance in the amount of 10 to 20 percent of credit loss Customers who cease business because of bankruptcy or business interruptions caused by fire, storm, wind, flood and earthquakes
B 40%
According to the Wells Report submitted by The Association of Certified Fraud Examiners, the most likely method to discover fraud is through a(n) _____. A) internal audit B) tip C) external audit D) confession by the culprit
American with Disabilities
An action of congress that requires business make provisions for access by disabled people
Surety Bonds
An agreement with an insurance or bonding company that will pay a specified amount in the event that the entity bonded fails to comply with specified contractual agreements
Deductible
An amount of loss that is specifically excluded by the insurance contract not paid by an insurance company The HIGHER the deductible the LOWER the policy premium payments will be
T
Business interruption insurance provides funds to pay the ordinary operating expenses of your business if it is forced to close temporarily because of an insured event.
B
Business risk is: A) the probability that a business will understate its revenues and overstate its deductible expenses. B) the probability that the future state of the business will be less successful than planned. C) the probability chance that a business will grow two-fold in a year. D) the probability level of two different businesses having to share the same resources.
Coverage
Contractual provisions of insurcacne policies that specify what risks the insurance company is assuming The most common MANDATORY insurance coverages are: liability for damages caused by vehicle accidents and illness and injury caused by employment Determine which risks are to be covered Vehicle liability Worker's compensation General liability Various types of malpractice coverage
Commercial Property insurance
Covers losses to the business property form causes such as fire storm vandalism and theft Pay losses resulting from floods or earthquake Commercial property insurance covers losses to the business property from causes such as fire, storm, vandalism, and theft Insurance is determined: Property's insurable value Amount of deductible loss Amount of co-insurance required (co-pay) Loss limits of the policy
Fidelty Bonds
Dishonesty Bonds REpay employers for losses caused by dishonest or negligent employees Cover losses from employee fraud, theft, forger, and embezzlement Purchased only for EMPLOYER benefits
loss of key employees
Employees whose experience and skills are critical to the success of the business
T
Errors and omissions insurance cover claims made by clients of attorneys, accountants and other consultants.
F
Fidelity bonds are also known as surety bonds. A) True B) False
Deductible
Is the amount you have to pay out-of-pocket for expenses before the insurance company will cover the remaining costs. For example, if you get into an accident and your medical expenses are $2,000 and your deductible is $300, then you would have to pay the $300 out-of-pocket first before the insurance company paid the remaining $1,700. However, if your accident only resulted in $300 in medical expenses, then you would pay the $300 deductible and the insurance company would pay nothing
Regulation of the Workplace
Laws and government rules that limit the freedom of business owners to manage their business as they please Resulting in employer violations that range from having an employee one time gorget to use required safety equipment to failing to provide required accommodation for handicapped employees and others to discrimination against a protected class
Tax Codes
Laws and regulations that specify the requirements of taxation Responsibility on YOU not the IRS. Fraud different than penalties. Get in trouble for payroll tax not fraud
Disability Coverage
Less common Will pay specific fixed costs of business such as rent salaries and utilities in the event that the owner or other named key person becomes disabled Even Less common is one that will pay specific dollar amounts to the business to replace lost revenue caused by the disability of key person
Employee Theft
MISAPPROPRIATION of business property by employees of that business Involve direct stealing of money or other assets of the business Conduct of an illegala ct that is intended to provide personal benefit at a cost to the business Most common: pilfering of items of small value, such as office supplies and small hand tools Estimated that 95 % of small business face at least some sort of loss annually.
limit your exposure
Managing risk from violations of tax regulations by _____ Keep complete, accurate accounting records: Control access to accounting system File all source documents Establish a relationship with both an accountant and lawyer who are expert in tax issues Make paying your taxes your first financial priority
Vehicle Liability Insurance
Mandated by the legislatures of all the states and territories of the US Min amount of coverage are specified for proerty damage caused by the vehicle and for injury suffered by anyone other than the driver of the vehicle
Workers Compensation Insurance
Mandatory in SOME states Discretionary In all states, this law provide fixed monetary awards to employees who are injured or disabled on the job Enforeced through administrative procedures which preclude mployees during their employers Federal statutes are limited to workers whoa re employed in some interstate commerce will rise as claims against it rise but it is required insurance.
Financial risk Nonpayment of debts Changes in technology Injury and illnesses suffered by employees Injury from accidents incurred by customers Natural events (storms, floods, fire, earthquakes) Theft of business property Misbehavior by employees
Most commonly identified sources of risk
crime insurance
Offers protection against losses from crimes committed against your business protection against losses from crimes committed against your business may include employee misconduct insurance to prevent incidents such as embezzlement. Other policies may require bonding employees who handle large amounts of money.
Disability Insurance
Part of life insurance Most common provides the insured person with funds to replace income lost because of inability to work The probability of shorter periods of disability is MUCH HIGHER Most common- BuyOut Insurance
t
Payment for injury or damage that occurs during the use of a business's products is referred to as product liability. A) True B) False
Injuries suffered while upon business property Injury or damage that is caused during the use of the business's products
Risk from customers primarily arises from:
F
The Age Discrimination in Employment Act makes it illegal to discriminate against people who are younger than 35 years of age. A) True B) False
F
The Equal Employment Opportunity Commission was established to enforce the provisions of the Americans with Disabilities Act of 1990. A) True B) False
C
The OSHA is: A) an act of Congress that provides training for workers who are injured on the job. B) a commission established to enforce the provisions of the Equal Employment Opportunity Act. C) a government agency created to enforce safety in the workplace. D) an act of Congress that makes it illegal to discriminate against people who are older than 40 years of age.
Insurable Value
The amount of an asset for which a company will write an insurance policy
Collusion
The greatest threat of loss from employee dishonesty occurs when to or more employees _____. Aggree together to defraud your business Most common is theft of cash and inventory Chas is most usually stolen by making false disbursements Inventory stolen through false employee sales
1) Events related to the property of the business 2) Events related to personnel 3) Events related to customers and others
Three general types of events that cause business risk:
General Liability Insurance
Umbrella Policy Success protector Policy Exist to pay losses that are not covered by other liability insurance
Insuring Against Risk
Use of insurance can minimize the damage that such risks can cause Can minimize the damage that such risks can cause The key is using the RIGHT amount of insurance at an affordable rate
Sharing Risk
Very effective method to reduce and to control business risk is to share that risk with other entities By forming joint ventures, by joining industry groups, and by obtaining government grants and guarantees
Franchise or Corporation Tax income tax employee taxx sales and use tax
What are 4 types of taxes imposed on small business. 15% of tax paying business are not complying with the rules
Internal Revenue Service EEOC OSHA
What are the 3 regulations that most small business have trouble with?
Insurable value Deductible loss Co insurance Loss of limits of the policy
What are the 4 categories that determine the cost of property insurance
Violation of Government Regulation
What has become a source of significant business risk over the last 30 yearS? stategies for compliance Stay small enough so rules do not apply Indifference proactive
F
Worker's compensation insurance is mandated by the legislatures of all the states and territories of the United States.
A
_____ are an agreement between two or more entities to pool resources in order to complete a project. A) Joint ventures B) Sole proprietorships C) S-corporations D) LLCs
Premium
is the amount of money that an individual or business must pay for an insurance policy. Iis considered income by the insurance company once it is earned, and also represents a liability in that the insurer must provide coverage for claims being made against the policy. Insurance companies examine the type of coverage, the likelihood of a claim being made, the area where the policyholder lives or operates a business, the behavior of the person or business being covered, and the amount of competition that the insurer faces.
Risk
is the very real likelihood that the business may not succeed The probability that future states of being will be worse than you expect
Medical Coverage
most highly desired form of insurance for most employees Strong retention incentive for employees obtain reduced rates an can include yourself and your family least expensive way to obtain key person insurance is part of a comprehensive medical insurance plan that covers all employees
Life Insurance
Most common kind of coverage on key person Only specific events, including disability, death are INSURED EVENTS
B All the value of a property does not have insurable value. The amount of an asset for which a company will write an insurance policy is called an insurable value.
The amount of an asset for which a company will write an insurance policy is called a(n) _____. A) deductible B) insurable value C) co-insurance D) credit insurance
Term Insurnance-
provided by you, the employer Is a form of insurance that does not accumulate any value over the contract term Very expensive for healthy young people Premium increase with age and with specific risk factors such as obesity, health problems and history of driving while intoxicated
Business Interruption Insurance
provides funds to pay the ordinary operating expenses of your business should it be forced to close temporarily because of an insured event. Can be purchased at a stand alone policy, most usually acquired as a provision of commercial property insurance funds to pay the ordinary operating expenses of your business should it be forced to close temporarily
OSHA
A government agency created to enforce safety in the workplace. MOST INDUSTRIES do no apply to firms with fewer than 10 employees Should provide medical examinations for all her employees Low hazard industries are exempt from the record keeping requirements of the regulation overs all employees except those in mining, transportation, state and local governments, and self-employment. is a government agency created to enforce safety in the workplace. OSHA rules in most industries do not apply to firms with fewer than 10 employees.
C
Adverse possession occurs when: A) two different business entities share human resources between themselves. B) rules and procedures that work to limit the opportunity for employee theft or malfeasance are enforced. C) the owner of real property does not enforce property rights and allows a nonowner to use the property. D) the physical control of an asset is separated from the person accounting for that asset.
A
Amanda recently tried out a new skin cream. However, using the cream caused severe rashes on her body. She can make a _____ to compensate for the damage that the cream caused. A) product liability claim B) errors and omissions claim C) malpractice claim D) catastrophe claim
Personnel Insurance
Available to protect both you and your employees forms pacific risks Key person insurance, life, disability and medical coverage : available to protect both you and your employees from specific risks Life Disability Medical coverage
Risk Averse
Avoid risk Most prefer to avoid risk to the extent possible Consider what they could lose
Unemployment Insurance
Collected by the IRS and state agencies as a percentage of tax upon payroll Amount collected varies among industries and among business within an industry Seasonal layoffs pay HIGH amount of unemployment premiums than do those that have stable employemtn
Co Insurance
Contract requirement that works to prevent property owners from deliberately underinsuring Owner carry insurance in an amount equal to a stated minimum percentage of the market value of property Most usually 80% If the owner allows insurance coverage to fall below this amount then the amount that the insurance company will pay in the event of loss is reduced by an amount proportional to the amount of underinsurance They want to increase the amount of premium that the insurance company collects relative to the risk that the insurance company is taking by insuring the property The higher the value of property, the greater the likely payout an insurance company will have to make in the event of the loss
CREDIT CARDS
IT Increases sales for the business Restaurants, clothing retailers barbers and beauticians face relatively low risks of loss form NONPAYMENT because most of them produce CREDIT only by accepting credit cards, which REDUCES the risk of nonpayment
Theft insurance
Insurance on physical assets, Greatest threat of loss because of employee dishonesty is the misappropriation of cash CASH can NOT be insured Require all employees with access to money or to accounting for money to be BONDED normally included in insurance on physical assets
Key Person
Insurance protects you in the event that key employee dies or is disabled and connote work life insurance used to cover this
T
Internal control is the primary method of ensuring honesty in employees. A) True B) False
Property of the Business
Involves SPECIFIC forms of risk Inventory can be stolen, machinery can break Buildings can be damaged or destroyed Land may become contaminated Patents may be infringed upon
Buyout Insurance
What is the most common type of disability insurance? Provides funds to the business to purchase the ownership position of a disabled partner
D
Which of the following individuals does the OSHA Act cover? A) George, a self-employed entrepreneur B) Will, a miner C) Tracy, a police officer D) Julie, a salesperson at a cosmetic store
D
Which of the following represents the first task to be completed before a comprehensive insurance program can be developed for a business? A) Determining which risks are to be covered B) Developing a business plan C) Assessing internal weaknesses D) Identifying risks
A
help repay employers for losses caused by dishonest or negligent employees. A) Fidelity bonds B) Surety bonds C) Product liability insurance D) Credit insurance
Rehabilitation Act o
1973 An act congress that provides training for workers who are injured on the job
Events Related to Personnel
3 Main types: Employee Theft Violation of Governmental Regulation Key Employees
Product Liability
: payments for injury or damage that occurs during the use of the business's products Payment for injury or damage that occurs during the use of the business's products is referred to as product liability. The magnitude of losses resulting from product liability claims has increased greatly in recent years with an increase in class action lawsuits.
EEOC
A commission established to enforce the provisions of the Equal Employment Opportunity Act Their rule making authority has grown from the agency start in 1964 5 protected classes: Race Color religion sex or national original Since then this has grown: Age discrimination Rehabilitation ADA Civil Rights Act
Insurance
contract between two parties in which one party agrees, for a fee, to assume the risk of another Is a contract between two business in which one , the insurance company for a fee agrees to indemnify the other for specific losses that are liekly to occur in the future Insurance company contacts to pay money to your business if a specific COVERED event occurs that causes your business to suffer financial loss Provides a benefit by requiring a relatively small fee compared to the amount of loss that is possible Insurance company makes a profit by collecting PREMIUMS for coverage from many business for the SAME set of risks Insurance provides a benefit by requiring a relatively small fee compared to amount of loss The more likely an event is to occur, and the greater the potential amount the insurance company must pay, the higher the price you must pay for coverage
Business Risk
probability that the future state of the business will be less successful than planned The level of probability that the future economic state of the business will be wise than expected The level of probability that the future economic state of the business will be worse than expected It is the probability that the future state of the business will be less successful than planned, resulting in the loss of value of business assets.
