SEC Targets Improper Revenue Recognition Schemes
Improper revenue recognition is the most common accounting violation targeted by the SEC. A January 2021 report issued by the Anti-Fraud Collaboration analyzed over 500 SEC enforcement actions involving accounting and auditing violations filed between 2014 and mid-2019 and found the most common type of fraud was improper revenue recognition (43%), followed by reserves manipulation (28%), inventory misstatement (12%) and loan impairment deferral (8%). The report also noted that “improper revenue recognition appeared to be the most prevalent fraud scheme in almost every year, and it was among the top two fraud schemes from 2014 through mid-2019.”
In addition, a recent report issued by Cornerstone Research found that about one-third of the SEC’s accounting and auditing enforcement actions filed in 2020 involved revenue recognition violations. Notably, of the 18 SEC enforcement action involving announcements of restatements, 15 alleged improper revenue recognition.
Based on the current economic environment and increased pressure on publicly traded companies to meet Wall Street’s expectations, we expect the SEC to continue or increase its efforts to root out and halt improper revenue recognition schemes. Whistleblowers can assist the SEC in these efforts and earn awards under the Dodd-Frank Act’s SEC Whistleblower Program. Since 2012, the SEC has issued more than $1.2 billion in awards to whistleblowers.
SEC Whistleblower Awards...
Carter alleges false claims after being linked to a Jane Doe lawsuit that initially named Sean “Diddy” Combs A federal judge has ordered that Shawn “Jay-Z” Carter’s lawsuit accusing a Jane Doe and ...