Illegal Accounting Practices You Should Avoid

Forensic-Account-Fraud

Accountants are very important in the business industry. Companies and business owners hire accountants for so numerous reasons. Accountants provide their employers professional services such as accounting, bookkeeping, preparing tax, business advisory and auditing. With the help of accountants, companies and businessmen can focus all their attention on operating the business increasing the chances for their businesses to grow. Acquiring the services of accountants are cost and time efficient. It prevents any inconsistencies in the tax, business or financial statement thus avoiding any legal actions from the government. And lastly, accountants can help minimise the tax amount an individual or a company has to pay. However, there are those accountants and their employers who are caught up in lowering their taxes as much as possible that they even use illegal means. If you have an accountant, here are the illegal accounting practices you should know and avoid.

  1. Kickbacks and payoffs – Companies contract different vendors and suppliers to provide the raw materials for manufacturing and production. There are times when the one in charge of contracting vendors and suppliers would ask for kickbacks and payoffs in exchange for choosing a particular supplier. This money will be charged to the company by the supplier and would end up as company expense or miscellaneous.
  2. Money laundering – There are crime syndicates all over the world which look for ways to pass their money as acquired legally. One of their primary methods is to use a company as a platform to make the money legitimate. Another money laundering practices are known as juggling accounts and cooking the books. Juggling accounts is used to cover illegal activities such as fraud and embezzlement. On the other hand, cooking the books is the common term for deliberate accounting fraud. Money laundering will cost the company to lose tons of money and thus the company accountants should be monitored carefully to prevent such illegal activity.
  3. Record private expenses as business expenses – Some businessmen and accountants would record private or personal expenses as part of the company expenses in order to minimise the tax. Though this is an effective way of lowering tax payments, the penalty for committing such illegal accounting practice is heavy if caught.
  4. Sales skimming – Tax greatly depends on the sales of the company. There are accountants who would suggest sales skimming or deliberately not recording some sales to minimise the tax. If inconsistencies will be seen by government auditors, then the one committing sales skimming will be fined heavily.

If your accountant is suggesting or already using these illegal accounting practices, it is better to replace them in order not to put your business and resources.

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