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The Pros And Cons Of Fraudulent Financial Reporting

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In the present day competitive business environment, it is vital that companies operate in a manner where they could be able to assure long term business sustainability and competitive advantage over the rivals in a particular marketplace. With the changing context of the business over the years, companies need to offer services and/or products in alignment with the needs to the market or the customers. Organisations are also identified to face with numerous challenges, which further encourage them to use effective operational approaches to avoid complexities in business. Additionally, in order to ensure continuous growth in the business, organisations also need to ensure considerable control over their activities with specific regard to the…show more content…
Fraudulent financial reporting within any particular business can lead to or affect the overall efficacy of a business in the long run. Understanding gained from the past instances with regard to fraudulent financial reporting affirmed that such activities could lead to complete downfall of a business. The cases of Enron and WorldCom are some of the most notable instances that can be bring into notice in this context.
Fraudulent Financial
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Likewise, non-adherence to the ethical and legal principles of accounting can influence the business negatively. Notably, companies that are involved with fraudulent financial reporting are on the receiving end of direct impact of such practices in both the short and the long run. The impact may not only be in the form of financial loss but it can be in the form of reputational damage also. Notably, banks who meet the funding source of companies involved with fraudulent financial reporting will be in the verge to lose its investment. It has been noted that in general scenario, fraudulent financial reporting is conducted with the intention to resent an improved positioning of the business in front of the investors and other stakeholders. However, in the process it affects the quality as well as integrity of the process of financial reporting of the business. Furthermore, since fraudulent financial reporting is against the objectives of any business, it will certainly lead to jeopardizing the accuracy of the financial results in a considerable manner. Accounting professionals associated with the development of financial reports in any business may also be at risk of losing their license once caught on the grounds of fraudulent financial reporting. It has also been observed from secondary
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