Waste Management Accounting Scandal

Accounting Fraud > Accounting Scandals > Waste Management Accounting Scandal

The Houston based Waste Management has been the target of several scandals, however the one that is specific to accounting is one that was one of the more basic schemes and serves an important lesson to accountants.

In 1998, it was uncovered that an accounting scandal had been perpetrated at Waste Management. The company had been minimizing the amount of time in which it depreciated its property, plant, and equipment over a shorter period of time than actual useful life. This caused greater tax deductions due to depreciation expense in early years, and made after tax profits appear to be be higher than actual.

The uncovering of the scandal led to a major drop in stock price and led to the replacement of top executives. When the new CEO ordered a review of the company’s accounting practices, it was discovered that the net result had been $1.7 Billion in inflated earnings. Waste Management paid $457 Million to settle a shareholder class-action suit and the SEC fined Waste Management’s independent auditor, Arthur Andersen, $7 million for their role.

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