Fraud And Fraud In Accounting

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With a desire to make their company appear better than it actually is, there has been a constant issue of corruption and fraud in accounting. Individuals who practice in fraudulent activities often seek to enrich themselves, establish a financial presence, or even gain respect from others. Not only do these scandals cause the companies to fall into bankruptcy, but also leads to innocent people losing their entire life savings. Over the past decade, numerous frauds have been discovered worldwide. Some of those frauds include Enron, WorldCom, Cendant, Adelphia, Parmalat, Royal Ahold, Vivendi, and SK Global. In most cases, the auditors were alleged to be the cause since it’s their responsibility to detect the fraud. Thus they were sued by stockholders for performing negligent audits. With the persisting issue of fraud in the discipline of accounting, a solution must be established. The government has stepped in and put in place regulations and laws that are meant to eliminate accounting fraud. One of the many laws set in place was Considerations of Fraud in a Financial Statement Audit which gave U.S. auditors expanded guidance for detecting fraud. Another major government implication is the Surbanes-Oxely Act which established the Public Company Accounting Oversight Board or PCAOB for short. It’s intended to “protect the interests of investors and further the public interest in the preparation of informative, fair, and independent audit reports”. In the article Current Trends in Fraud and its Detection “to provide more than reasonable assurance that financial statement fraud is not being committed, fraud audits rather than GAAS audits need to be performed”. A third party of CPA’s will come in and perform an audit on the company to e... ... middle of paper ... ...adual change in terms of both significance and magnitude of the shift in attitudes”. With ethics embedded in them, fraudulent activity can be avoided almost completely. There has been a long history in business scandals due to accounting frauds, many of which induced serious consequences. Corporations have gone into bankruptcy, employees have lost their entire life savings, and multiple lawsuits have been pursued. According to the American Journal of Business “former Enron employees testified that while they had retired with $700,000 to $2 million in Enron stock, they now had virtually nothing except their social security funds”. The government couldn't help but to take notice and implement laws and regulations to eliminate For the most part, accounting fraud was significantly reduced. Along with some new techniques, it can become nothing more than a rare occasion.

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