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Scandals In Accounting

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The financial base of any business depends on the strength of their accounting office and financial advisory board. This, over time, has lead to businesses in tough times causing them to take faulty measures and put false information on the accounting documents. This is a major issue causing stockholders to make investments based on inaccurate accounting documents. Fraud occurs when there are misstatements purposely on financial statements. Fraud is wrongful and a deception for personal gain. Recent history proves that major corporations in the accounting world commit fraud in their financial statements. This causes companies to pay millions in damages as well as declare bankruptcy. Companies are not the only ones responsible to ensure that the financial statements are accurate. The responsibility also falls in the hands of the accounting firms that audit the companies. The accounting world did not prepare for the amount of fraud that was occurring in the early 2000s that changed the accounting world forever. The accounting firms that audit the companies have a responsibility to keep independence and to detect if there are any fraud or misstatements occurring within the accounting departments. Independence means that the auditor must have no direct connection to the company or the company’s main officers. The auditor will not have independence if the auditor owns stock of the company or has a family member, such as their Dad, as the CEO of the company. Most audits of major companies have audit teams. The audit team breaks up the company’s financial statements to document and analyze the data while ensuring that the correct accounting standards are being followed and meet regulation. Tests are run on samples of transaction in ... ... middle of paper ... ...se of accounting fraud. Even ones that got involved in any type of accounting fraud are still suffering from the consequences, such as, fines, as well as losing reputation in their name, such as, Waste Management Inc. The passing of the Sarbanes Oxley Act of 2002 has decreased the amount of fraud that is taking place today and has put their main interest in protecting the investors. A company being honest and showing integrity in their financial statements has helped investors by giving them the correct information before they invest, and understanding the amount of risk they are taking by investing in each particular company. The laws have evolved with the fraud in accounting, but will the laws keep up with the revolution of the criminal mind? In the past the laws were one step behind, but as for now they are holding their ground to protect people from fraud.
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