Recognizing misleading financial statements: lessons from SEC enforcement actions

A continuing stream of financial frauds, corporate scandals and abuses of shareholder trust has generated intense scrutiny of businesses in the press, in Congress and by the Securities and Exchange Commission (SEC). The SEC has made clear its intention to pursue aggressively individuals and public c...

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Bibliographic Details
Published in:Commercial Lending Review 2004-11, Vol.19 (6), p.3
Main Authors: Thorne, Jerry, Mautz, Jr., R. David, Highsmith-Quick, Gwendolyn, Robinson, Diana R
Format: Article
Language:English
Subjects:
Accounting
Administrative law
Court hearings & proceedings
Criminal investigations
Criminal law
Financial management
Financial misrepresentations
Financial reporting
Financial statements
Fines & penalties
Fraud
Injunctions
Inventory
Investigations
Public companies
Revenue recognition
Sales
Sanctions
Scandals
Securities regulations
Subpoenas
Violations
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Summary:A continuing stream of financial frauds, corporate scandals and abuses of shareholder trust has generated intense scrutiny of businesses in the press, in Congress and by the Securities and Exchange Commission (SEC). The SEC has made clear its intention to pursue aggressively individuals and public companies involved in financial frauds - as well as their independent auditors. This article will help lenders appreciate the types of accounting and financial reporting violations that occur most frequently and attract regulatory attention from the SEC. This type of understanding is vital to understanding borrowers' financial statements and recognizing deceptive reporting practices. Lenders who look closely at internal control systems, ethics policies and corporate culture can minimize the risk of lending to organizations that later become embroiled in a financial scandal.
ISSN:0886-8204