Keeping proper financial records is imperative when you have a business — whether you do it yourself, have your own on-staff accountant or hire an outside accounting firm.
What happens, however, when the records aren’t right? Well, that could lead to criminal charges of accounting fraud. It could also have serious consequences for your business — even if you did nothing intentionally wrong.
Why would accounting fraud be a problem?
Accounting records come into the picture for many financial decisions regarding a company. For example, a company’s financial records will be examined when the company wants to get a loan. Investors might look to those records to try to determine the fiscal health of the company before they invest.
When records are fraudulent, people who are making financial decisions about a company don’t have accurate information. The misinformation can come in the form of unrecorded expenses or inflated income. Accounting fraud can also involve not properly recording a company’s liabilities or assets. These sometimes impact the liquidity of the business, which is another important factor for many financial decisions.
All of these can make the company look like it’s doing better than it actually is. Once the reality of the situation is discovered, that can be devastating to a company’s reputation.
What should you do if an accounting error has led to legal trouble?
Anyone who’s facing accusations of accounting fraud should learn more about the defense options they have. Because these cases often involve a lot of paperwork, getting started on the defense strategy early is important. Think carefully about how each option might affect your life now, but don’t forget to consider what they might mean for your future.