What are the Consequences of Not Following Accounting Principles?
Failure to adhere to accounting principles can lead to several negative consequences. It can result in financial misstatements, which may mislead investors and other stakeholders. This can lead to incorrect business decisions, loss of investor confidence, and legal repercussions. In severe cases, it can result in business failures, as seen in notable corporate scandals like Enron and WorldCom. Therefore, it is essential for businesses to consistently follow accounting principles to maintain trust and credibility.