Do you have evidence of a publicly traded company engaged in accounting fraud? Is a large, private corporation manipulating its books and records in order to avoid paying taxes to the Internal Revenue Service? Our team of whistleblower attorneys help individuals report corporate wrongdoing to the SEC and IRS.
We can assist you with preparing a submission to the IRS or SEC whistleblower programs, as appropriate. These government agencies offer rewards to eligible individuals of between 10 and 30 percent for information that leads to the recovery of monetary sanctions or funds from tax noncompliance. If the SEC or IRS are able to collect because of your information about accounting fraud, we will prepare a persuasive submission on your behalf to encourage the payment of a reward.
Examples of Accounting Fraud to Report
Slush Fund Accounting
Slush fund or cookie jar accounting involves the practice of setting aside earnings into reserves so that they can be tapped into later instead of reporting lower earnings. The practice is used by public companies to mislead investors into thinking that the company has experienced steady growth instead of periods of fluctuation.
Publicly traded companies may try to mislead investors through accounting tricks designed to ensure they beat analyst estimates. One way they have done this in the past has been to disregard Generally Accepted Accounting Principles with regard to recognition of either revenues or expenses. By manipulating when these events are recorded, businesses can make it look as if they are beating analyst estimates.
Businesses having problems with large, high-profile contracts may decide to cook the books rather than admit problems with the contract to investors. These companies will generally also be making statements that materially misrepresent the conditions at the company.
Companies have improperly inflated sales figures by forcing products through a distribution channel in order to temporarily increase revenues. This may be done at the end of the quarter in order to meet sales and analyst targets.
Inflated Asset Valuations
Investment banks and asset managers often need to value their portfolio of investments and report them to customers, investors or creditors. If they do not have sufficient assets, they may see increased redemptions or declines in their liquidity as those who provide credit or allow them to trade on margin adjust to lower asset holdings. In uncertain periods, they may engage inappropriate accounting tactics in order to avoid issues. Another area where this happens is at Ponzi schemes, where redemptions are paid with incoming assets from other individuals rather than the fake profits achieved through inflated asset values.
There have been numerous other techniques to engage in wrongdoing through manipulation of corporate books and records, including fake earnings such as booking loans as revenue and lowering expenses by moving debts off the balance sheet. Auditor independence is a related issue which may lead to government fines if there is a conflict of interest..
Our Latest Blog Posts on Accounting
Government Agencies with Whistleblower Programs
Securities & Exchange Commission
If there is misconduct in the preparation and audit of the financial statement of a public company, the disclosure of the improper information can mislead investors and impact the valuation of the company’s stock. The SEC investigates possible securities law violations related to financial reporting and audit failures with the Financial Reporting and Audit Task Force.
Fighting accounting fraud has been a priority of the SEC for the past few years and is expected to increase as the cases concerning financial impropriety during the Great Recession are wrapped up. Previously, accounting problems took center stage following the internet bubble when scandals were revealed concerning Enron, Worldcom and others.
The SEC pays rewards for information according to its whistleblower program, as authorized by the Dodd-Frank Act and implemented according to SEC rules. Eligible individuals which assist the SEC in recovering more than $1 million in monetary sanctions may receive a payment of between 10 and 30 percent of the recovery.
Internal Revenue Service
The IRS pursues cases of tax noncompliance where an individual or business pays insufficient taxes. This may result from the omission of income from its tax returns or the use of improper deductions in order to reduce the amount of tax paid by an entity.
When more than $2 million in taxes and penalties is in dispute, a report will fall within the section 7623(b) program for the payment of rewards to tax whistleblowers.
Our Experience in Accounting
Eric Young represented the accountant who received the first tax whistleblower reward under the IRS section 7623(b) program. The accountant remained anonymous and received an award from the IRS of $4.5 million. Our firm continues to represent other whistleblowers reporting wrongdoing involving accounting and financial statements to the IRS and SEC.
Eric was also involved in the discussions surrounding changes to the International Ethics Standards Board for Accountants Code of Ethics on the reporting of suspected noncompliance with laws and regulations. The International Federation of Accountants continues to examine the issue of how to proceed with the ethical reporting of corporate wrongdoing in accounting. Learn more about accountants as whistleblowers.