It is not difficult to “cook the books”, as most accountants will be aware.
But what about the external auditors? They are supposed to be independent and professional, right? In theory. Far too often though, the partners of audit firms develop a cosy relationship with their clients, especially if the audit fee is substantial.
In this article for Aliran Monthly, I discuss some of the common tricks used by financial con-artists and dishonest management/staff in committing fraud or engaging in “creative accounting”. This is by no means an exhaustive expose – just a sample to give you an idea how vulnerable most firms are to fraud and dishonest accounting.
Devious accountants can also manipulate financial results by bringing forward or deferring the recording of expenses in the accounts. Thus, a firm’s management is able to show a higher or a lower profit figure to suit its circumstances. It may want to show a lower profit figure – to save taxes or to provide a cushion for future years. Or it may want to disclose a higher profit figure for the year – to match overly optimistic profit forecasts that were issued earlier to entice investors to buy shares in the firm. This kind of unethical accounting practice is often cynically referred to as “creative accounting” or window-dressing. Full article: EXPOSED – Dark secrets of the private sector