The consequences of committing accounting fraud




Introduction

Federal and state laws impose a clear requirement on businesses of all types to properly account for income, expenses, and profits, as well as assets and debts. Although isolated and negligent errors or omissions may not have significant negative repercussions, the fact is that the consequences associated with accounting fraud can be serious.

Financial penalties

Depending on the nature of the business enterprise, federal and state government agencies have the authority to fine not only the company or firm for accounting fraud, but the individual or individuals who perpetrated it. In addition, the officers or managers of a company also face the prospect of financial penalties. These company officials face the prospect of a fine even if they had no actual knowledge that accounting fraud was taking place under their supervision.

Company officials expose themselves to even greater liability if they do not disclose a case of fraud as required by law. Such disclosure may include contacting a government regulatory agency or notifying members of a corporate board of directors, depending on the structure of a particular business enterprise.

License suspensions

Associated with financial penalties, some government agencies have the power to suspend the authorization of certain companies to conduct business transactions after accounting fraud. Suspension can be for a specific period of time or indefinitely. For example, a state insurance commissioner may suspend the ability of an insurance company to conduct business transactions in a particular jurisdiction after such fraud.

Revocation of professional certifications

If a licensed professional, such as a certified public accountant or an attorney, is liable for accounting fraud, these individuals face the possibility of losing their licenses. This type of financial crime generally results in the most significant penalty that a licensing agency has the power to impose. A CPA’s certification can be revoked while an attorney can be disqualified.

Criminal prosecution

The most serious sanction associated with accounting fraud is criminal prosecution. In some cases, the perpetrators of such fraud may be criminally prosecuted for their conduct. Typical charges include fraud, mail fraud, robbery, or theft by deception, depending on the particular set of facts associated with it.

Criminal prosecution can occur in federal court, state court, or depending on the circumstances, both. The penalties for this type of criminal misconduct likely include imprisonment. In addition, a judgment may impose a criminal fine on the perpetrators of accounting fraud. The imposition of a criminal fine may occur in addition to a civil fine imposed for the same course of conduct.

Summary

If accounting fraud is suspected, a qualified attorney with experience in both business and criminal law should be consulted. Taking a proactive stance represents the best way to reduce the repercussions associated with it.

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