Identify and explain three reasons why accounting information might deviate from the underlying economic reality.

Second, organizations can use creative accounting techniques such as inflating revenue numbers or understating expenses in order to influence investors and other stakeholders about their financial performance. Finally, there are differences between what is reported for tax purposes versus what is reported in financial statements due to rules governing taxation that are based on different definitions of income than those used by general accounting standards.

In conclusion, it is important to be aware that accounting information does not always provide an accurate representation of the underlying economic reality because it can contain estimates, inconsistencies and discrepancies related to reporting requirements for taxes versus audited financial statements among other factors. Therefore it is important for organizations to remain vigilant when evaluating their data so they can identify any potential issues before they become bigger problems down the road.