Top Accounting Scandals

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Top Accounting Scandals
In this article, we will talk about top 10 accounting scandals of all time. If you’re curious about the history of each, read them all in one go.
Let’s get started.
1 # Scandal of Arthur Anderson Company:
It happened in the year 1998. Arthur Anderson, a waste management company reported around $1.7 billion in fake earnings. They deliberately increased the time period of depreciation of their plant, equipment, and property. While the new CEO, A. Maurice Meyers and his team members went through the books of accounts, they found out this unprecedented scenario. Arthur Anderson has to pay $7 million as a penalty to Securities and Exchange Commission (SEC) and the shareholder class-action suit settled for $457 million. After
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Enron, a commodity and energy based service company was in trouble for removing a huge amount of debt from their balance sheet. As a result, the shareholders of Enron lost $74 billion. Many employees lost their jobs. Many investors and employees lost their retirement savings. It is one of the most cited accounting scandals of all time. It was the work of then CEO Jeff Skilling and former CEO Ken Lay. Ken Lay died even before serving time. Jeff Skilling was imprisoned for 24 years. Enron filed for bankruptcy and it was found that Arthur Anderson was also guilty of falsifying Enron’s accounts. Sherron Watkins had acted as an internal whistleblower. And the suspicions increased as Enron’s stock price increased.
3 # Scandal of WorldCom:
It occurred in the year 2002. WorldCom was a telecommunication company. The name of WorldCom has not changed; it is MCI, Inc. now. The fraud happened due to the inflated assets of the company. Then CEO, Bernie Ebbers didn’t report the line costs by capitalizing and he also inflated the revenues of the company by recording fake entries. As a result, 30,000 people lost their jobs and investors lost around $180 billion. The internal audit team of WorldCom found out $3.8 billion fraud. After the fraud was discovered, WorldCom filed for bankruptcy and Ebbers got a sentence of 25 years.
4 # Scandal of
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As the name suggests American Insurance Group was a multinational insurance company. The fraud was huge. The fraud was about $3.9 billion. The complaints were that this huge sum of money was alleged and there was also manipulation of the stock price and bid rigging. The person responsible for the fraud was the CEO, Hank Greenberg. It was not exactly known how SEC found out, but possibly a whistleblower hinted it to SEC. The CEO was fired and AIG had to pay $10 million to SEC in the year 2003 and $1.64 billion in the year 2006.
8 # Scandal of Lehman Brothers
It happened in the year 2008. It was another most cited scandal in the history of accounting frauds. Lehman Brothers was a global financial service provider. The actual fraud was done by hiding the losses of around $50 billion as sales. When the company went bankrupt, the actual scenario got public. The key players were the executives of Lehman Brothers and also the auditors of Ernst & Young. They sold toxic assets to Cayman Islands banks to showcase that they had $50 billion more in cash. SEC couldn’t prosecute them due to lack of evidence.
9 # Scandal of Bernie
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