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How Accounting Scandals Happen And What Are Their Ramifications

Accounting scandals can be summarized as the misdeeds of some of the most trusted executives of big firms or governments. Some ways in which the companies or executives can perform these accounting scandals are through misdirecting of funds, misusing of funds overstating the corporate assets, or underreporting the existence of liabilities, understating expenses. This could be done in cahoots with the people from the other organizations or even in the government. In all such cases the fraud is generally investigated by the government oversight agencies.

The accounting scandals that are unearthed are only the tip of a mammoth failure on the part of the various watchdog agencies that are responsible for keeping an eye on the companies as well as organizations. Some of the easiest of accounting scandals can take place in the privatization as well as the takeover operations. In the takeover procedures the top executive of the company can very easily reduce the company’s stock prices by adopting various practices. Once the prices of the stocks are reduced the takeover executive earns a lot by the transferring of the stocks of the share holders into his pocket. In return for this accounting artistry the former executive then receives an obscene amount of money from the takeover executive.

Similarly the privatization of the non-profit organizations can also lead to accounting scandals. The top executives in the government owned or a non-profit organization can make the company look like a financial disaster and then sell it to some private company. Quite similar to the takeovers the top executives of the privatized company earn a lot on the transition. Another misinformation that is spread across the population is that the privatization is very much beneficial as the erstwhile sinking firm has now been miraculously saved by the private company.

All such accounting scandals lead to lack of faith of the general population regarding the government entities and thus the option of privatization appears to be the only best solution.