Introduction

Federal and state laws impose a clear requirement on businesses of all types to properly account revenue, expenditures and profits as well as assets and debts. Although isolated, negligent errors or omissions may not result in significantly 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 governmental agencies possess the authority to fine not only the company or firm for accounting fraud, but the individual or individuals who perpetrated it. In addition, officers or managers of a business also face the prospect of financial sanctions. These company officials face the prospect of a fine even if they lacked actual knowledge that an accounting fraud was being perpetrated under their watch.

Company officials expose themselves to even greater liability if they do not disclose an instance of such fraud as required by law. Such disclosure may include contacting a government regulatory agency or notifying the members of a corporate board of directors, depending on the structure of a particular business enterprise.

License Suspensions

Associated with financial penalties, some governmental agencies have the power to suspend the authorization of certain businesses to transact business in the aftermath of accounting fraud. The suspension can be for a specific period of time or indefinitely. For example, a state insurance commissioner can suspend an insurance company’s ability to transact business in a particular jurisdiction following such fraud.

Revocation of Professional Certifications

If a licensed professional, like a certified public accountant or an attorney, is responsible for accounting fraud, these individuals face the prospect of losing their licenses. This type of financial crime typically results in the most significant penalty 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 can, in some cases, be prosecuted criminally 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, in both venues. Penalties for this type of criminal misconduct likely includes incarceration. In addition, a sentence can impose a criminal fine on the perpetrators of accounting fraud. The imposition of a criminal fine can occur on top of a civil fine imposed for the same course of conduct.

Summary

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