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Motivation and Consequences for Violating GAAP

What is the motivation for violating the generally accepted accounting principle of matching revenues with expenses? What is the result of committing this fraud?

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When management violates GAAP in terms of the matching principle, it is a direct attempt to increase revenue and/or decrease expenses. Both are violations of GAAP. If management is attempting to achieve a certain net income and revenue is not as high as expected in the particular period, management will oftentimes shift expenses. They will delay expenses that have been paid until the next period (when revenue might be higher), or they will move revenue forward that hasn't yet been earned, which should legally be recorded in the next period. By delaying ...

Solution Summary

This solution explains the motivation for violating the matching principle in GAAP. This solution also explains the consequences of committing this violation.