Accounting fraud relates to illegal actions in a business in which an employee steals from or defrauds the company of its rightful assets. The crime might also include inflating or padding records to make the company appear to have a better financial standing than it really does. Accounting fraud encompasses a diverse slate of criminal activities. Six common examples follow:
- Asset losses or unauthorized use. An employee takes money or property from the company or uses company property for his or her personal gain. A common (and trivial) example of asset losses brings to mind the age-old ethical ‘gotcha’ question, “Have you ever stolen a pen from your employer?” Even such trivial asset losses – such as sketchy “disappearances” of inventory or office supplies – cause real problems for corporations, resulting in millions of dollars worth of lost goods a year for larger businesses. The crime of unauthorized use can also have surprisingly broad and diverse consequences. An executive, for instance, who illegally commandeers a company vehicle for personal use can face an array of serious criminal charges, depending on the circumstances and the nature of the illegal borrowing.
- Tax avoidance. With the agreement of senior management and other parties facilitating the fraud, the involved persons reduce their taxable corporate income so that they pay reduced taxes.
- Personal purchases. By adjusting supplier invoices or expense reports, the employee uses company money to purchase products or services for his or her own use. In general, a person will need to hold a senior position in order to pull off this type of scam.
- Falsifying financial statements. The company falsifies its financial information in order to make it seem as if it’s in a stronger financial position than it really is. Executives often engage in this type of illegal behavior in an attempt to sell themselves to investors or to obtain bank loans. Examples might include: moving around debt, adjusting the timing of depreciation, accelerating the timing of incoming funds, delaying the timing of expenses and inflating existing inventory.
- Payroll fraud. Executives add fake or dummy workers to the payroll, who can then get “paid.” That money going to no one can then be funneled to conspirators or used to finance other investments or operations designed to enrich or otherwise benefit conspirators.
- Creating fraudulent financial statements. A management team that wants to achieve bonuses for performances may alter key financial reports in order to qualify for them. For instance, the conspirators may try to show that the company turned a healthy profit when it did not.
Combatting Accounting Fraud Charges with Effective Legal Representation
If you or someone in your business faces accounting fraud charges, the consequences both for your freedom and for the company could be dire. Our experienced criminal defense attorneys can help you come to terms with your legal challenges, explore the evidence and develop a plan. Please call us for a confidential intake evaluation.