Quite recently, the SEC charged the company Marrone Bio with accounting fraud related to improper revenue recognition.

According to the SECs complaint filed in U.S District Court for the Eastern District of California:

In November 2015, Marrone Bio restated its results for fiscal 2013 and the first half of fiscal 2014, reversing approximately $2 million of previously reported revenue.

Absi (former COO) previously inflated Marrone Bios revenues by offering distributors inventory protection, a concession that allowed distributors to return unsold product.

Absi also inflated Marrone Bios revenue by directing his subordinates to obtain false sales and shipping documents and intentionally ship the wrong product to book sales.

Absi abused Marrone Bios expense reporting system to pay for personal items, including vacations, home furnishings, and professionally installed Christmas lights for his home. Absi falsified his bank and credit card statements to make it appear as though he had incurred the expenses for legitimate business purposes.

Absi personally profited from his scheme, receiving more than $350,000 in bonuses, stock sale proceeds, and illegitimate expense reimbursements.

What incentives did management have to misstate revenue at Marrone Bio? Please be specific.

Ch. 9 Auditing the Revenue Cycle - Auditing- A risk-based approach to conducting a quality audit. ISBN: 978-1-133-93915-3