In general, regulators frown on types of accounting that massage revenue numbers specifically to conceal poor performance or meet earnings targets. There are a variety of revenue recognition practices that are permissible under generally accepted accounting principles (GAAP) and federal securities laws, provided the policies are disclosed to stakeholders. Without appropriate disclosure, certain accounting practices can mislead investors about a company’s profitability and growth.

In this article, Audit Analytics examines the recent increase in the amount of enforcement actions citing false and/or misleading statements.