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Creative Accounting, Fraud and International Accounting Scandals by Michael John Jones

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Chapter 7

Taking the Long View: Accounting Scandals over Time

Michael Jones

7.1 INTRODUCTION

Human nature does not change. Therefore, the hopes and desires of people living in ancient, medieval or modern times remain very similar. As long as there has been accounting, therefore, there have been temptations for individuals creatively to use that information and to indulge in fraud. Interestingly, the boundaries between creative accounting and fraud have been fairly flexible. In other words, one period’s creative accounting becomes the next period’s unacceptable accounting, which if followed may be judged fraudulent. This is because creative accounting often contributes to accounting scandals. After these accounting scandals the accounting rules and regulations are often changed to prevent these same creative accounting practices reoccurring.

It is obviously not possible to discuss all the past accounting scandals and the part that creative accounting and fraud have played in them. There are simply too many. The aim of this chapter is just to discuss some of the most famous and interesting ones. Also, the aim is to look across time to show the universality of accounting scams. In Figure 7.1, there is a list of major accounting scandals and scams that have been covered. These are divided into five time periods: the ancient and medieval period, the seventeenth and eighteenth centuries, the nineteenth century, the twentieth century up to 1945 and, finally, the twentieth century from ...

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