Allegations of abuse of the revenue recognition principle have become all too common in recent years. For example, it was alleged that Krispy Kreme sometimes doubled the number of doughnuts shipped to wholesale customers at the end of a quarter to boost quarterly results. The customers shopped the unsold doughnuts back after the beginning of the next quarter for a refund. Conversely, Computer Associates International, was accused of backdating sales - that is reporting a sale in one period that did not actually occur until the next period in order to achieve the earlier period's sales targets.
What motivates sales executives and finance and accounting executives to participate in activities that result in inaccurate reporting of revenues?
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