What do companies gain by resorting to manipulative accounting techniques?

Businesses have a large amount of financial data to be
processed. Some of the basic categories under which it falls include purchases, sales,
wages, interest payments, dividends, depreciation, etc. These have to be carefully
recorded over the entire financial year and at the end of the year the information is
analyzed to estimate the revenues and expenses of the company and later used to
determine the profits made. Businesses have to pay corporate income taxes based on the
profits made by them. To avoid paying or to reduce the tax liability, manipulative
accounting techniques are used quite often.

Publically
listed companies are obliged to send the annual balance sheet to all their shareholders
who use the information provided to determine the financial health of the company, how
much it is actually worth and what is the return on equity that they can expect.
Manipulations are done here to show increased profits or assets and make investors feel
that the management of the company is doing a fine
job.

Showing better financial results allows the management
to increase their salary and take extra perks and bonuses. Wrongly reported data can
also influence the stock price of the company which can be used to their advantage by
the management of the company.

Some famous examples of
fraud where financial information was manipulated include scandals involving large
corporations like Enron, Qwest, WorldCom, Sunbeam, etc.