Accounting irregularity

An accounting irregularity is an entry or statement that does not conform to the normal laws, practises and rules of the accounting profession, having the deliberate intent to deceive or defraud. Accounting irregularities can consist of intentionally misstating amounts and other information in financial statements, or omitting information required to be disclosed.^[1][2] Financial misstatements would cause huge losses for investors.^[3] More irregularities are found in companies with higher incentives. ^[4] Accounting irregularities are often committed as a means to an end. For example, assets misappropriations may be concealed by using irregular accounting entries and profit overstatements may inflate the year end bonuses to offender. Offender may falsify the company performance to conceal low productivity and enhanced stock price.^[5] Accounting irregularities are commonly distinguished from unintentional mistakes or errors.^[1][2] The misstatements could cause significant concern about the quality of the firm's financial reports.^[6]

References

1. Hendrikse, John W. (2004). Business governance handbook : principles and practice. Leigh Hefer. Cape Town: Juta Academic. ISBN 0-7021-6499-2. OCLC 62755423.
2. Kwok, Benny K. B. (2005). Accounting irregularities in financial statements : a definitive guide for litigators, auditors, and fraud investigators. Aldershot, Hants, England: Gower. ISBN 0-566-08621-2. OCLC 58043144.
3. Donelson, Dain C.; Kartapanis, Antonis; McInnis, John; Yust, Christopher G. (2021-11-01). "Measuring Accounting Fraud and Irregularities Using Public and Private Enforcement". The Accounting Review. 96 (6): 183–213. doi:10.2308/TAR-2018-0592. ISSN 1558-7967. S2CID 233759117.
4. Henselmann, Klaus; Ditter, Dominik; Scherr, Elisabeth (2015-12-01). "Irregularities in Accounting Numbers and Earnings Management—A Novel Approach Based on SEC XBRL Filings". Journal of Emerging Technologies in Accounting. 12 (1): 117–151. doi:10.2308/jeta-51247. ISSN 1558-7940.
5. Kedia, Simi; Philippon, Thomas (2009). "The Economics of Fraudulent Accounting". Review of Financial Studies. 22 (6): 2169–2199. doi:10.1093/rfs/hhm016. ISSN 0893-9454.
6. Ge, Weili; Matsumoto, Dawn; Wang, Emily Jing; Zhang, Jenny Li; Thomas, Wayne (2020). "The Price of Being Foreign: Stock Market Penalties Associated with Accounting Irregularities for U.S.-Listed Foreign Firms". Contemporary Accounting Research. 37 (2): 1073–1106. doi:10.1111/1911-3846.12530. ISSN 0823-9150. S2CID 211322858.