Accounting scandals have become a regular occurrence in the American business landscape, which will most likely continue throughout the years to come. The natural state of humanity is unsatisfied, and so human beings strive for greater success regardless of ethics. It has become apart of human nature to sin, and as long as this remains true, "Greed" will find nourishment in the business world. Since accounting is the basis of all financial reporting, a corporate scandal in this area is generally referred to as accounting fraud, which with the help of the media, becomes an accounting scandal. .
"Cooking the books," as it was commonly known, was considered white-collar crime when detected. For the most part, any such activity was lightly, if at all, punished. In the present day business world, messing with results has much more serious consequences. Hundreds of millions, even billions of dollars of market capitalization and shareholder value evaporate, as large companies are forced to re-state their financial results long after they have been publicly announced. When fraud is detected shareholder suits, fines, legal fees and cash settlements eat up millions and billions more, which can sometimes lead to lives being ruined. Today, guilty executives now serve time for their tampering; this includes CEOs, CFOs, Corporate Lawyers, Senior Managers and sometimes, a wayward auditor. .
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One of the most notorious examples of accounting fraud in recent times involved Cendant Corporation. A few years ago, this New York City based marketing and franchising company, admitted to using irregular accounting practices to inflate earnings by as much as $500 million dollars over a three year time span. When the scandal was made public, the company lost several billions in market value in a single day. Company executives quickly became scared, nervous, and distressed. As anxiety was setting in, the executives tried to shift blame to the outside auditors, Ernst & Young, who in turn had to hire over priced lawyers to defend them against Cendant, as well as the SEC, who said that Ernst & Young should have uncovered the fraud during auditing.
