We are well aware of the importance of accounting. It allows business owners to keep track of all the transactions the company has engaged in. A look at the financial statements gives us an idea about the financial position of the company.

It’s also no secret that companies often manipulate their financial statements. They might do it in order to project a positive image of the company in the eyes of stakeholders or even to hide frauds.

Let’s take a look at some of the worst corporate accounting scandals in US history.

Enron Scandal

Enron is an energy and service company based in Houston. Back in 2001, the company’s CEO Jeff Skilling, and former CEO Ken Lay, kept debts from the company’s balance sheets.

They would have gotten away with it if it weren’t for Sherron Watkins who raised suspicions regarding the company’s high stock prices.

As a result of the fraud, stockholders lost $74 billion. Several employees lost their jobs. The company’s CEO was sentenced to 24 years in prison and the company itself went bankrupt.

American Insurance Group Scandal

The CEO of the company Hank Greenberg committed a massive fraud of around $3.9 billion through bid rigging and stock price manipulation.

They were caught when SEC regulators conducted an investigation after getting a tip from a company’s employee. They were fined $16.4 billion in 2006. However, no criminal charges were filed against the company.

WorldCom Scandal

Back in 2002, the CEO of the company Bernie Ebbers inflated the company’s assets value by $11 billion. He did so by inflating the company’s revenues through fake entries and by not reporting the costs accurately.

The company internal auditing team uncovered a fraud of $3.8 billion. As a result, Ebbers lost his job and was sentenced to 25 years in prison. The company’s CFO also lost his job while the investors lost $180 billion.

It was after this scandal that Congress introduced the Sarbanes-Oxley Act.

Bernie Madoff Scandal

In order to understand how Bernard Madoff tricked investors out of $64.8 billion, you need to understand what Ponzi schemes are.

A Ponzi scheme is a scam in which a company offers investors high rate of return while keeping the risks at a minimum. The company generates returns for old investors by acquiring new ones.

This is exactly what Barnard Madoff did. He had assistance from his accountants David Freihling and Frank DiPascalli.

It was Madoff’s own sons who reported his crimes to the authorities. As a result, he was sentenced 150 years in prison. He was also charged a restitution of $170 billion.

All of the aforementioned examples give you an idea regarding the importance of accounting for businesses. You need to make sure you are transparent in your dealings. You do not have to do it on your own though. You can seek assistance from third parties.

Get in touch with us. We offer professional bookkeeping services. In addition to that, we also offer additional services, which include medical billing solutions, and online payroll services boca raton fl. Contact us at 954-596-9966.