Introduction

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

financial sanctions

Depending on the nature of the business enterprise, federal and state government agencies have the authority to fine not only the business or firm for accounting fraud, but also the individual or individuals who perpetrated it. Additionally, 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 being perpetrated under their supervision.

Company officials expose themselves to even greater liability if they fail to disclose 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 sanctions, some government agencies have the power to suspend the authorization of certain companies to transact business as a result of accounting fraud. The suspension may be for a specified period or indefinitely. For example, a state insurance commissioner may suspend an insurance company’s ability to transact business in a particular jurisdiction following such fraud.

Revocation of Professional Certifications

If a licensed professional, such as a certified public accountant or attorney, is responsible 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 disbarred.

criminal prosecution

The most serious penalty associated with accounting fraud is criminal prosecution. The perpetrators of such fraud may, in some cases, be criminally prosecuted for their conduct. Typical charges include fraud, mail fraud, theft, 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. Penalties for this type of criminal misconduct likely include imprisonment. In addition, a judgment may impose a criminal fine on perpetrators of accounting fraud. The imposition of a criminal fine may occur in addition to a civil fine imposed for the same conduct.

Summary

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