Accounting fraud involves the deliberate manipulation and falsification of a company’s accounting records to make the company’s performance appear better than it really is. Accounting fraud is illegal, often leading to securities violations and harming investors and others in the process.
How Does Accounting Fraud Happen?
There are many ways that companies and accountants can manipulate the perception of a company’s value and performance (often through false or misleading corporate disclosures) and other public statements. These accounting tactics include:
- overstating revenue;
- understating expenses;
- misusing corporate funds;
- overstating corporate assets; and
- underreporting liabilities.
Accounting fraud can significantly harm investors who are denied access to full, accurate information about a publicly-traded company’s financial information, while company insiders and others may unfairly profit or avoid major losses (often through illegal insider trading).
Enforcement & Penalties for Accounting Fraud
Fraud in accounting has become more pervasive in recent years, leading to SEC investigations, criminal charges, and civil lawsuits against some major corporations, their directors, and accounting firms.
Under federal securities laws and related SEC rules (such as SEC Rule 10b-5), investors and others harmed by fraudulent accounting practices can seek recourse through civil lawsuits. Civil lawsuits can be brought against not only the corporation involved in accounting fraud, but also individuals involved in the process.
Report Accounting Fraud to Our Attorneys
Speak with one of our securities lawyers by calling (866) 981-4800 or by filling out the form to the right.
Girard Gibbs encourages persons who know about possible securities violation to contact the firm. Under the SEC whistleblower laws promulgated under the Dodd-Frank Wall Street Reform and Consumer Protection Act, whistleblowers may be receive a reward of up to 30 percent of the recovery for information leading to a successful enforcement action by the SEC and are protected from employer retaliation. If you believe that you have information about a securities violation, please contact us at 866.981 4800 or by filling out the form at the right.