What is accounting fraud?

On Behalf of | Aug 2, 2021 | Fraud

Business owners in New York may be charged with accounting fraud when there is evidence of manipulated financial records. In order to bring a conviction for accounting fraud, the manipulation of records must be deliberate.

How accounting fraud differs from fraud

Many companies make optimistic projections about their future financial prospects in an effort to lure investors. While these exaggerated estimates would need to be revised later and could even lead to fraud charges, they don’t fit the definition of accounting fraud. For accounting fraud to take place, financial records must be falsified.

Inflating profits and hiding liabilities

One of the financial records that could be falsified in an accounting fraud situation is the profit and loss statement. Inflating a company’s profit creates an illusion of financial health that could fraudulently drive up share prices. Similarly, a company that hides the true size of its debt or understates its costs paints a false picture of value.

Hiding profits and inflating liabilities

Financial fraud can also occur when a company hides its profits and overstates its liabilities. This kind of fraud might take place when company executives are attempting to skirt tax obligations. Any manipulation of share prices that corresponds with falsified financial documents could be evidence of accounting fraud.

Falsifying a company’s current value

One of the most notorious examples of accounting fraud was the Enron scandal. In this case, company executives used shell companies to hide liabilities that would have otherwise been reported by Enron. These actions led to Enron executives being accused of inflating their company’s value.

Accounting fraud charges

If you have been accused of manipulating financial documents in some way, a criminal defense attorney may be able to help you. Through forensic accounting, it might be possible to demonstrate that no financial records were intentionally falsified.