Top 5 Accounting Froud_ Biggest Stock Scams Of The World
financial statement fraud is an intentional act done within the company by manipulating the information of a
financial statement it directly affects
investors and
employees in a span of 10 to 20 years most of us have witnessed a number of scandals that have not only shaken the world but have resulted in the destruction of the entire company and huge losses to many when an
investor puts his or her hard-earned
money into a firm it's like
investing a trust into the
financials as well as the growth prospects of the concerned firm sadly malicious acts of certain individuals leads to heavy consequences for investors who invest their money in the company's shares in this video we are going to discuss top accounting scandals of publicly traded firms you can learn from it and carefully invest your money after proper analysis of the financial statement of the concerned firm let us begin with worldcom whose accounting fraud came to light in the year
2002 based in virginia united states worldcom was a telecommunication firm whose fraud is regarded as the largest accounting scandal by the upper management the chief
financial officer of the company messed with the operating cost and misrepresented it in the
financial statement as a result of this in
2001 the revenue of the company ballooned up by a huge amount of around three billion dollars in fact it reported that the firm incurred billions of dollars of profit instead of loss if they would have reported the right information in their financial statement of 2001 fiscal it would have lost a handsome amount of money but in the end by 2002 they had filed for bankruptcy after which the increased scrutiny and legal investigation unfolded the entire scandal after the fraud was discovered bernard ebers at ceo was sentenced for
25 years in jail for reporting false documents sadly investors lost more than
180 billion dollars in total and 30 000 people lost their jobs secondly is the enron scandal that occurred a year before the world com fraud enron which was a firm dealing in energy commodities and related services has carried out one of the most controversial
accounting scandals of all time based in texas the fraud revolved around surely removing a huge amount of debt from the balance sheet the company was using certain loopholes to carefully hide a mountain of debts and falsely inflated the earnings of the company with this the upper management also pressurized its auditing firm to ignore the fault as a result of this fraud the shareholders lost more than
74 billion dollars in total the share price of enron registered a huge dip within a span of one year after the investigation was carried out the company ceo jeff skillings and ken lay were found guilty and enron headed towards bankruptcy next in this list is waste management company whose accounting scandal was reported in the year
1998. the company was accused of reporting completely false earnings of around
1.7 billion dollars in the financial statement the misinformation was discovered
when a new ceo joined the company in the end the securities and exchange commission discovered that the owner of the company and its former ceo had even misreported the information related to the waste management plant and the equipment used within the firm upon investigation the guilty people had to pay a penalty and the case by shareholders was settled with the payment of 457 million dollars then comes the freddie mac scandal that took place in the year 2003. freddie mac or the federal home loan mortgage corporation was found guilty of misreporting earnings worth around 5 billion dollars in their financial statement sadly the entire upper management consisting of ceo ceo and cfo were involved in this fraud and were well aware of the fact that the company's earnings were overstated when the case came to light the ceo glenn clark and ceo leland brenzel were not fired from the firm but were fined with an amount of 125 million dollars the last scandal we are going to tell you about was an american security system based company known as taiko it was based in new jersey and the scandal carried out by its ceo dennis koslowski and cfo mark schwartz came out in the open in the year 2002. both the ceo and cfo had stolen more than 150 million dollars from the company's account through the path of unapproved loans as well as the sale of stocks not only this they also deliberately mentioned increased earnings of the firm when both dennis and mark were found guilty by the office of the district attorney of manhattan they were sent to jail they were also asked to give around 2.92 billion dollars to the investors to name a few other frauds that were carried out by mistaking information in the financial statement include health south scandal in 2003 american international group scandal in 2005 lehman brothers scandal in 2008 and bernie madoff scandal again in 2008. time and again these frauds give a lesson that while investing make it a point to carefully analyze the fundamentals of the company with this it is also important to learn how to read the balance sheet or financial statements of a firm so as to find out any flaw once you learn it the process is simple and just needs you to be focused
