Accounting Blunders by Big Firms to learn from

When it comes to billion-dollar companies, balancing the books is not always their strongest suit. In the past decade, the decade that is known to have made accounting far more easy has a record number of accounting blunders by multinational companies. Some of these blunders are more than just a typo mistake and we wonder what was up with the accounting department of these companies?

So, to reiterate how a simple accounting error can cost you a billion dollars, let us talk about a few noteworthy accounting blunders to learn from:

Bank of America overstating its income

Back in 2014, Bank of America overstated its capital in 2009 and the sprawling error lingered on for years. It was not until 2014 that the Bank realized that it had $4 billion less than the expected amount. This was a classic case of overstating your capital due to misinterpretation of the company’s usable capital.

Banks are supposed to get the numbers right in order to sustain their working model. What happened with Bank of America is a mistake that seems unbelievable. The accounting system’s failure to give an accurate picture of the company’s financials went undetected by the external auditor of the company. Believe it or not, the banks too can make such cardinal mistakes and this is why having a solid accounting system with a proven record of handling significant financials is so important.

Hertz Global Holdings pre-tax income tells a different story

Another massive accounting blunder came from Hertz Global Holdings. The company misrepresented its pre-tax payment financial statement. This was later traced backed to multiple accounting errors the company made over multiple reporting periods. This error cost the company to pay a whopping fine of $16 million as a civil penalty. According to SEC’s findings, the company’s inadequacy to keep a balance between earning estimates and meeting internal budgets caused it.

Groupon conveniently misses the customer refunds

Another one-of-its-kind accounting error was seen back in 2021 when Groupon reported its fourth quarterly earnings. The company failed to take into account the customers’ complete refunds within the same quarter. This meant that the company’s fuzzy mathematics completely ignored the money it needed to set aside for the customers’ refunds. This led to the incorrect filing which resulted in a massive increase in the company’s overall loss in the same quarter from $42.7 million to $62.9 million. Groupon’s stock shares suffered a 6% depreciation after the company’s restatement.

Key Takeaway

Accounting and bookkeeping still remain some of the most crucial tasks for businesses. Regardless of the business size, a company is bound to make an accounting error if it does not have a sound accounting system. Moreover, choosing the right accounting method i.e., accrual or cash-based method is also integral to making informed financial decisions in the future.

Never underestimate the complexity of your business accounting and always have a robust system in place. If big fishes can make the most unbelievable accounting errors so can you. Implementation of a sound bookkeeping system is important to avoid such mishaps.

With that, it’s a wrap from us!

This Post Has One Comment

  1. Jerry

    Accountants for Self-Employed can make or break your business. Not only must they keep the books, but accountants for self-employed also provide you with all the tools and resources needed to become successful in this competitive world. In order to decide which accountant to choose, you need to think about the type of accountant you’re looking for.

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