Why Should Employees Report Accounting Fraud in the Workplace?
Sometimes an employee will bear witness to illegal activities in his workplace. This may include a financial crime, such as when an employee takes money out of a cash register. Some employees will see a subtler kind of theft in the form of accounting fraud. Accounting fraud occurs when a company falsifies financial statements. There are a number of reasons a person should report this crime to authorities like the Securities and Exchange Commission or his state's attorney general.
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Ethics
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One of the main problems with accounting fraud is that it is not just unethical, but illegal, too. A person who commits accounting fraud is not just breaking the law but is contributing to a corrosion of standards in the workplace. If a person in a workplace sees another person acting deceptively, then this behavior is normalized. By reporting the crime, an employee is upholding standards of moral behavior in the workplace.
Company's Future
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Not only is accounting fraud corrosive, but it can spell doom for a company's financial future. When a company is engaging in financial fraud, it is often doing so as a means of hiding large losses. If the company is in dire financial shape, reporting the books fraudulently may disguise the extent of problems and spell doom for the company. An employee wishing to keep his job may have an interest in bringing fraud to light.
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Investors
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One of the main victims of accounting fraud is investors. While investors may believe that a company is in a certain shape, the truth may be that the company is in dire straits. By perpetuating this deception, a company may lead investors to take enormous losses. Some of these investors may be placing a large amount of their income -- essentially, a part of their futures -- in a company's stock, meaning they have much to lose.
Complicity
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A final reason that an employee may want to report accounting fraud is to escape punishment if he is complicitous in the fraud. For example, if an accountant for a company helped cook the books, he may wish to report his actions to authorities to prevent being charged with a crime. Federal authorities are often willing to give more lenient sentences to cooperating witnesses.
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