Voodoo accounting is a slang term for illegal or unethical accounting practices that seem to magically improve a company’s financial performance by inflating revenues and hiding expenses - or both.
Voodoo accounting practices came under scrutiny after a series of accounting scandals surfaced, including the collapse of Enron, Tyco and WorldCom.
The Sarbanes-Oxley Act of 2002 was passed in response to these scandals to change the rules and introduce stricter penalties for those responsible for fraudulent activities.