Accounting mistakes are quite common in businesses. Some of them are the consequence of fraud, but errors may arise even when everyone is honest. The time and effort required to correctly fix the issues might be an annoyance at times. However, even a little slip-up may result in significant monetary losses, dissatisfied consumers, or even legal action. Here are four major corporations that learned the hard way about the consequences of sloppy accounting practices.
1. Uber Can't Add Up!
Earlier this year, Uber was criticized for using the wrong accounting technique for calculating driver commissions, which was just one of several recent issues involving the company. After two years of operation, the firm had been deducting 25% of the base rate (i.e., before any taxes or other fees were added) from every trip. While the corporation has acknowledged the mistake and agreed to compensate the drivers, the projected financial effect to the company is between $45 and $50 million.
2. The $1 Billion Mistake at Bank of America
Unrealized losses on loans inherited from Merrill Lynch were not disclosed by Bank of America until 2014, due to an honest accounting error. Four billion dollars was withheld from the authorities. As BofA started offloading its Merrill Lynch debt, issues started to arise. Because of these trades, the unrealized losses became palpable, and the bank was required to declare them to authorities. But it didn't, and it blamed the error on some spreadsheet clumsiness on the part of an employee.
3. Valeant's Growing Issues
The pharmaceuticals company Valeant has had its fair share of problems in recent years, including an accounting error that led to an inflated sales report of more than $58 million. Valeant's yearly revenue is in the billions, so this amount is little in the grand scheme of things. However, the accounting miscalculation lent credibility to the pharmaceutical company's detractors, who had long maintained that Valeant engaged in aggressive and questionable accounting procedures. Despite the fact that SEC investigations showed Valeant had more problems than basic accounting errors, the company's stock nevertheless fell by 86% in 2016.
4. Groupon Ignores Refund Requests
Groupon, a company that offers daily bargains, had a series of financial mistakes and administrative blunders in 2012, which angered both consumers and investors. Groupon's financial report for the fourth quarter omitted some of the consumer refunds it was processing. Groupon's shares dropped by six percent after the news was announced, and the company's fourth-quarter losses widened from $42.7 million to $62.9 million. The accounting firm hired by Groupon said that "material deficiency in its internal controls" was to blame for the blunder.
Simple accounting errors may have catastrophic consequences, as seen by the recent debacles at Uber, Groupon, BofA, and Valeant. These are only a few instances of bad bookkeeping and accounting mismanagement that resulted in wasteful spending in the corporate sector. There is no way around implementing the necessary controls and advice to guarantee accurate and compliant accounting practices throughout your organization. Article kindly provided by 10ca.co.uk