Experience teaches that it can be dangerous to accept reported revenues at face value, even if they have been audited.

Many corporations employ highly aggressive recognition practices that comply with GAAP yet distort the underlying economic reality. Sometimes, executives hell-bent on “mak­ing their numbers” will cross the line into fraudulent revenue recognition. Often, outward signs of exceptional success indicate, in reality, a high prob­ability of downward revisions of previously reported revenues. Under in­tense pressure to maintain their stock prices, companies characterized by extremely rapid sales growth seem particularly prone to take liberties. In­formix vividly portrayed these hazards in 1997 by rescinding a substantial portion of its past revenues.