Using GAP to Defraud

Accounting is too complex for a single set of rules to effectively describe economic reality. Even honest and well-intended management sometimes stretch GAP a bit in order to present figures they think will more appropriately describe their performance. As long as investors, including supposedly sophisticated institutions, place fancy valuations on reported earnings that march steadily upward, you can be sure that some managers and promoters will exploit GAP to produce such numbers no matter what the truth may be. Charlie might have observed many accounting-based frauds of staggering size. It has been far safer to steal large sons with a pin than small sons with a gun.