When Tax Attacks: The Biggest Accounting Fails Ever

  • The worst accounting slip-ups
  • What went wrong?
  • The price they paid to fix them

Michael Godsmark,

May 8, 2018

The cock-ups that cost big bucks

Bad day at the office? You’ve got nothing on the guys in this blog!

Last week we posted on our Facebook page how an accounting mishap at Reading Council has so far cost them £200k to fix. Oops.

But as our mothers used to tell us, “worse things have happened,” and on this occasion, our mums were right. A £200k bill is a mere drop in the ocean compared to some of the accounting clangers that we’ve seen in the past.

We take a look at some of the worst.

 

Fannie Mae

Back in 2003, American mortgage giant Fannie Mae (no sniggering at the back, please) announced in their quarterly newsletter that it had made an accounting error to the tune of $1.1billion. Yes, billion.

A spreadsheet was to blame for the blunder, but it was described as an ‘honest mistake used in the implementation of a new accounting standard.’ Honest mistake or not, the damage had already been done. Share prices fell when the announcement was made, and trust for the company plummeted with it.

 

HMRC

Remember that one year that HMRC announced that 6 million UK taxpayers were due a rebate? We definitely do! In 2011 a new computer system revealed that historic errors meant HMRC had to repay a whopping £2.5billion in overpaid taxes. There were so many cheques to be posted that it took over a year to fix. But that feeling of social justice when the hunter becomes the hunted didn’t last too long… unsurprisingly the new system also highlighted millions who had underpaid their taxes too.

 

Tesco

Every little helps, but not much could help the nation’s biggest supermarket chain in 2014 when a mistake in their accounts lead to them overstating forecasted profits by £250m. Investors sued, senior execs were shown the door and shareholders showed their dissatisfaction by selling up and scarpering – £2bn was wiped off their share price following the error.

Accounting powerhouse PwC got a slap on the wrist, and last year Tesco was ordered to pay a fine of £129m by the Serious Fraud Office. We bet they didn’t forecast that one either.

 

California

The US state of California, famed for its beach bums and laid back way of life turned out to be a little too laid back in its accounts a few years ago. Plagued by a litany of oversights, California’s 2014 accounts ended up in the hole by a massive $31.6m.

The difference with this case was not just one error, but the entire catalogue, covering all the mistakes we’ve already highlighted and more. There was an overstating of revenues, understating of expenditures, errors in calculating how much money was owed to them and the biggie – someone accidentally adding some zeros, turning a revenue figure from $6.2million into $6.2billion. No way, dude.

 

The moral of the tale? Accounting errors can cost big money to put right. To get it right the first time, get in touch today.

Author Photo

About The Author

Michael is an enthusiastic and cheerful individual who, when not hard at work, enjoys mountain biking, cooking curry and travelling to new places.

   @MichaelWDVLL

Comments are closed.