Generally speaking, most accountancy errors are genuine mistakes that can be corrected relatively quickly and without any long-term damage to finance or reputation.
However, there are some accounting mishaps that may result in embarrassment for the company, and even criminal investigations, so it is always best to be careful.
Mobily
A telecommunications company in Saudi Arabia, Mobily had to suffer the embarrassment of accounting errors last year. Khalid al-Kaf, the firm’s CEO, was even suspended with effect from 21st November, 2014.
According to a report that was published on Bloomberg, the company’s financial statements for 2013 had been affected by “an error in the timing of revenue recognition from a promotional program”. Earnings for a period of 18 months had to be restated due to the errors made in accounting.
Penn West Petroleum Ltd
Accounting irregularities in 2014 were also the cause of problems for Penn West Petroleum Ltd. David Roberts, the new CEO and president of the company, was just starting to see results following a restructuring schedule, when reports were presented that indicated a number of irregularities in the firm’s accounting practices, which had allegedly been taking place over a number of years.
Penn West’s cash flow had been artificially inflated following the incorrect claiming of operating expenses. It was found that a number of retail investors had been claiming them as capital expenses to influence the stock price of the firm. Expenses with a value of $300m (£192.9m) had been misclassified and those involved were fired from their positions. The profits of the business were restated in September last year.
Tesco
The familiar household name of Tesco was recently besmirched, as the company was forced to admit that profits had been overstated for longer than initially thought. The chairman of the retail giant, Sir Richard Broadbent, eventually resigned following pressure from investors.
The company announced in October that profits had been overstated by £263m, which was far more than the amount given a month earlier at £250m. Tesco’s profits have been falling at a steady rate over the last few years, possibly due to competition in Europe. However, the reputation of the multinational retailer has been damaged further by the accounting errors.
The profit had been overstated by almost 25%, while costs had been understated. According to the chief executive, Dave Lewis, nobody gained financially from the situation, although he refused to say whether the errors were deliberate or genuine.
Accounting errors can have serious repercussions, so the financial advice of a professional outsourced accountancy service should be sought. Give us a call if you would like further advice.