accounting fraud

Querist : Anonymous (Querist) 12 January 2010 This query is : Resolved
one of my friend is working in accounts dept of a company, the co is doing financial manipulation in its books of account to raise money from bankers and others and finally plans to go for ipo after 1-2 yrs, pl tell me the liability of my friend as accounts manager of the co.

second whether your opinion differs if my friend himself is not passing any accounting entry, signing any docs , he is just making the projection as per management vision to be presented before investors / bankers.

pl do reply its urgent.

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A V Vishal (Expert) 12 January 2010
Your friend will be equally liable for the criminal act although he may not be doing the book keeper's job but it is well in his knowledge that the fraud is being systematically conducted by the management.

The second part of your query contadicts the first viz he is preparing the projections, if it is so there is no problem until these figures are not fudged in the books of accounts.

Arvind Singh Chauhan (Expert) 12 January 2010
Your friend may be prosecuted with other as common intention.

Raj Kumar Makkad (Expert) 13 January 2010
I do agree with vishal and arvind

Querist : Anonymous (Querist) 13 January 2010
hi thanks for the reply pl let me know in second part projections are made through my friend and no accounting entries are being passed by him and also he is not signing any single docs, however he attends meetings with the management with bankers / investors.

still in above case if he will be liable for prosecution, if yes then whats the way to escape.

A V Vishal (Expert) 13 January 2010
Yes Mr Raj, I have already replied to your second part in my first reply I am reproducing the same for your reference.

"The second part of your query contadicts the first viz he is preparing the projections, if it is so there is no problem until these figures are not fudged in the books of accounts."

As far the second part is concerned your friend will be still liable since everything is happening under his nose and is in his full knowledge. Take instance of the biggest corporate fraud of Satyam, the CFO Mr Srinivas, was arrested even though he did not pass any accounting entries but it was fully in his knowledge that the fraud was being committed systematically.