Accounting fraud or accounting scandals surface when executives of certain companies get involved in business scandals with political connotations. The actions of these executives include the use of complicated methods that allow them to misuse or misdirect funds, among other actions, all with the help of officials within other companies or associates.
The Securities and Exchange Commission (SEC) and other agencies in the U.S. have launched investigations that try to find any form of fraud related to "original" forms of accounting that can lead to frauds.
Some of the most prestigious accounting firms of the country have been involved in accounting scandals due to their lack of cooperation at the time of performing their functions as auditors; such functions include being aware of the possible publication of false financial reports by their clients. The problem of these false financial reports is that they mislead the real status of the finances of the companies of their clients. In most of these cases, the amount of the fraud is of more than a billion dollars.
Arthur Andersen, Ernst & Young, Deloitte & Touche, PricewaterhouseCoopers and KPMG, among others, are some of the accounting firms that were implicated in accounting frauds in 2002.
Due to the appearance of recent accounting frauds, a new Federal legislation was created with the purpose of limiting the non auditing services of public accountants. Accountants can give advice to clients on areas like tax issues or in the establishment of a tax shelter.