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Accounting Scandals

In: Business and Management

Submitted By yusarinisaid
Words 7029
Pages 29
Research Study

INTRODUCTION

Accounting scandals in business firms arise with the disclosure of financial misdeeds by trusted executives of corporations.

Examples of Accounting Fraud:

• Merging short and long term debt into one amount to improve the perceived liquidity of the company
• Failing to disclose risky investments or “creative” accounting practices
• Over-recording sales revenue
• Under-recording expenses (i.e. depreciation expense)

Accounting fraud leads to many serious problem for everyone not only for the perpetrator. Accounting fraud causes problem in the market place and the economy. As a result in most cases, investors' loose large sum of money due to the misrepresentation of financial position and financial result of the company. Also, because of this, there is lack of trust in the market, accounting system, and in the company in which accounting fraud was committed from the investors. Employees in that company are at rest of losing their job because of the scandal.

WHY DOES ACCOUNTING FRAUD OCCUR?

Fraud are triggered by three elements; rationalization, perceived pressure, and perceived opportunities. Whether the fraud benefits the perpetrator directly, or indirectly, such as benefiting the perpetrator’s company, the three elements are always present.

Rationalization- perpetrators find some sort of rationalization that makes their unethical behavior seem acceptable.

Perceived Pressure- perpetrators are faced with some kind of pressure, whether it be financial pressure, or executives pressure.

Perceived Opportunities- perpetrators see some sort of opportunity, such as promotion, otherwise they would not do it.

INTERESTING FACTS ABOUT AUTONOMY CORPORATION, PARMALAT AND HOMESTORE.COM ACCOUNTING SCANDALS

Autonomy Corporation
• HP accused the former Autonomy management, which was bought by HP for £6.7bn in...

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