When a Company Cooks the Books ...
A company's books should provide an accurate history of all moneys that flow through a company. When a company or its accounting firm inflates revenues or fails to mention obligations, that can mislead lenders, investors and others with a financial interest in the company.
ClassAction.com: Fighting Against Accounting Fraud
There are strict regulations against accounting fraud, yet it continues to happen. When investors and others are financially harmed, they may have a case for a class action lawsuit against the company and/or an accounting firm.
- Lying about revenues: When companies want to raise investment capital, they want to look good to potential investors. Inflating revenues, however, is illegal, and it obviously gives investors an inaccurate picture of the company's financial condition. Inflated revenues can also mean an immediate return to management by boosting bonuses based on profitability.
- Cooking the books: This colloquial phrase describes a practice of moving the numbers around and changing them to reflect what the company wants to be true rather than what is actually true. Accounting firms may be involved either from actively participating or in ignoring the signals that the numbers are being falsely manipulated.
- Funneling and siphoning: A company's executive management may be siphoning money into their own accounts or funneling money into questionable ventures not approved by the board and unknown to investors.
Accounting is at the heart of business reporting. Accounting fraud is a breach of fiduciary duty. It can mislead employees, investors, executives within the company, directors, lenders and regulators.
If you suspect accounting fraud that affects you and others, contact ClassAction.com to share your experiences.
