Accounting Fraud

When Company Books Aren’t Right

Lenders, investors and other parties with financial interest in a business can be fooled when the company or its accounting firm does not list obligations or inflates revenues. The company’s books should be kept in a way that provides an accurate history of all the money flow in the business.

Standing Up Against Accounting Fraud

A class action lawsuit might be necessary against the company and its accounting firm, as investors and others are financially harmed, because the books have not been kept accurately. There are strict regulations to ensure that businesses keep their books properly and when they do not, it is considered accounting fraud. Even with these strict regulations accounting fraud still occurs.

  • Inaccurate Bookkeeping: Inaccurate bookkeeping is also known as cooking the books, which describes the practice where the numbers are moved around. This allows the company to reflect what it would like to be true, rather than what actually is true, in dollars and cents of their business. When there are inaccuracies in the numbers the accounting firm might be involved or they can be overlooking the warning signs.
  • Revenue Lies: Companies lie when they want to have a good appearance for potential investors; they want to raise investment capital. Lying about revenues and inflating revenues is illegal. What this does is give investors inaccurate information about the financial condition of the business. Inflating revenues can also mean a return to management with bonuses based on profits.
  • Siphoning or Funneling Funds: Siphoning or funneling funds is illegal; this is when one of company’s executive management or other personnel in a position to siphon money into their own account or into questionable ventures is unknown to investors or the board.

Accounting fraud is a breach of fiduciary duty and it is illegal. It is a way of misleading potential investors, current investors, employees, executives, directors, regulators and lenders. Accounting is the one way to be aware of the financial standing of a company.

Accounting fraud can harm you and others, when it does Ehline Law would like to hear from you, as it might be a class action lawsuit when individuals have been harmed.