Reading Financial Reports For Dummies, 3rd Edition

Chapter 24

Ten (+1) Financial Scandals That Rocked the World

In This Chapter

Checking in with cheats

Taking a look at foul play

Finding fallout from faulty bookkeeping

I'm sorry to have to say this, but the hard part of writing this chapter was narrowing the list to ten. Too many candidates were competing for a spot on this list. Since 2000, more than 500 companies had to restate earnings after company executives, the board of directors, or the Securities and Exchange Commission (SEC) found problems with their financial statements. Because of these misstated earnings, stock prices dropped and investors lost billions of dollars on the stocks they held in their portfolios; some even had their entire retirement savings wiped out. Clearly, our entire financial reporting system needs a major overhaul.

Although the Sarbanes-Oxley Act of 2002 (you can find details about the changes that bill requires in Chapter 3) improved things a little, the mortgage mess of 2007 showed how much more needs to be done as financial institutions around the world shocked their shareholders when they lost billions due to mortgage-backed securities. Some of these securities were held on the books, but others ...