What Is Accounting Fraud?

Accounting fraud is the deliberate falsification of financial accounts to provide the impression of a company’s financial health. It also involves an employee, accountant, or the company itself deceiving investors and shareholders. Overstating revenue, failing to report costs, and misstating assets and liabilities are all ways for a firm to falsify its financial statements.
Accounting fraud requires a company to purposefully misrepresent financial records. Consider a company that provides a preliminary estimate that has to be changed later. Because the mistakes were not intentional, there was no accounting fraud. Let’s say the CEO of a publicly listed company makes misleading remarks regarding the company’s prospects on purpose. The Securities and Exchange Commission (SEC) may file a fraud charge against that CEO. It is not, however, accounting fraud because no financial records have been altered.