What Are The Causes For Accounting Fraud

Hearing about accounting fraud in the news and knowing the results makes us wonder why they do it. Why do these highly intelligent, well-respected men of society, resort to lying, cheating, and committing fraud? According to leading experts, many reasons for the changed behavior are the result of pressure from investors who expect a huge rate of return for their investing dollar. Many investors get greedy and expect a well-known company to produce big numbers.

 

What happens is that accountants in these large firms are trained to create reports and analyze the results of the company’s financial statements. They are only concerned with reporting the results. The head of the corporation influences these accountants to manipulate the numbers to make the company look good, even going to the point of threatening their jobs. So the accountants compromise the truth for the sake of their employer. They overlook the obvious hoping no one will ever find out.

 

If the company hires an outside accounting firm to do the financials, they may get too friendly with the big boss and this may force the accounting firm to compromise their integrity just to please their major client. The end result is lawsuits and fines, along with prison sentences.

 

An accountant’s main job is to uphold the laws and regulations of the AICPA and GAAP. This means working within the ethics and standards as set forth by these agencies. When an accountant does not do this we or she goes out of the bounds of these agencies, this forces the SEC to take over and other legal action occur.