Creative Accounting and Financial Scandals in Spain
Corporate fraud is a serious problem in the Spanish economy that has cost investors millions of euros. Time after time, we are ‘surprised’ by companies failing ‘unexpectedly’. In most cases, however, the evidence suggests the presence of ‘red flags’ alerting investors to the high probability that a corporate failure was about to occur. Many of the financial scandals have occurred in highly regulated sectors like banking (e.g. the Banesto case); some have had a significant media impact because of the political repercussions (e.g. the Grupo Torras case) and others have been given extra publicity because of the involvement of significant amounts of public funds to ensure that investors were compensated (e.g. the Gescartera case) (Gonzalo and Garvey, 2005, p. 429). Consistently, at times of crisis, many questions arise about the lack of effectiveness of the control mechanisms in detecting and preventing these scandals. Reacting in a similar way to regulators in many other countries (see, for example, Sikka, 1997), Spanish authorities have reacted to corporate scandals by enacting new legislation.
In Spain, accounting professionals and academics ‘… have generally shown no significant interest in analysing the causes of these scandals in proposing measures and reforms to make sure that they wouldn’t happen again’ (Gonzalo and Garvey, 2005, p. 430). García-Benau et al.’s (1999) analysis of ...