The world’s biggest accounting scandals have impacted world economy in a tremendous way. Business organizations and multinational companies which encounter specific internal and external pressures may commit specific crimes including manipulation of financial statements. According to Pawel Bilinski who is a director at Center of Financial analysis and reporting research, the fraud has to be committed by the management of a company which bears internal or external pressure to meet the market targets. Sometimes companies have to show favorable performance to attract and retain shareholders and investors. In case higher management exerts a pressure on staff to meet certain targets at any cost, the employees may get indulge in fraudulent activities to meet the specific targets.
Companies have to meet changing expectations of customers which lead to manipulation of financial performance records and covering of share price. Management staff has offered bonuses for meeting a specific goal and bonus shares are also issued in case staff succeeds in meeting the objective. It urges internal staff to meet the goal by fair or unfair all means. Companies have several other options to show a positive performance of the business by retaining investments or sale of business assets to pay a high dividend to shareholders.
1-Recently one of the world’s biggest accounting scandals revealed by anti-money laundering authorities which are committed by well-known company Toshiba. This accounting scandal has impaired the credibility of Japan and its accounting principles and implementation procedures. It has greatly impacted the perception of investors towards fair economic policies of the whole country and thus, Japan is deemed to lose various international investors. There are several reasons of accounting scandals and intentionally committed frauds.
2-Another biggest accounting scandal was exposed at The Bank of Credit and Commerce International. The bank became notorious for money laundering and various corruption activities which led to the loss of creditor money up to £10bn. It impacted the bank’s reputation for good and UK corporate governance ordinance was duly revised after considering this scandal.
3-In 2001 Enron countered bankruptcy due to miss representation in financial statements. Consequently, the company shut down and wiped away share capital of $74bn of investors and pension holders. It also gave rise to unemployment of thousands of employees associated with Enron.
4-Another biggest accounting scandal was associated with the chief executive of Tyco International in 2002. The board of directors was found to be using business money for personal expenses and lavish lifestyles. The chief executive, Dennis Kozlowski, after the confession of money corruption sentenced to imprisonment of 25 years along with his executives.
5-In 2011 the chief executives of Olympus were found to be involved in embezzlement of $1.7bn. The company’s management tried to hide company’s losses for more than 13 years and when exposed the chairman of the company and his members who proved to be convicted of crime sentenced to four years of imprisonment recently.
6-Tesco found to be involved in overestimation of its profit by £263m which it seemed to pay to suppliers. The exploration of fraud resulted in the dissolution of high management staff and board of directors. The scandal came out as an outcome of the financial crisis of store during 2007 and 2008.