>>Are that kind of practices legal under US GAAP, or any accounting regime? Or are there just no accountants on board?
Regardless of the legality, responsibility should ultimately fall on the shoulders of the investor to require financial reporting be done in a way that is acceptable to that investor, before they hand over money to the company. This may not be as true in publicly traded companies, where many amateur investors are participating in the market. The same goes for angel investing, if only because many companies at that stage may be pre-revenue or even pre-product. However, at the VC level, millions of dollars are invested to scale supposedly sound businesses. VCs should be sophisticated enough to manage this risk, and if I were an LP looking to put my money in a VC fund, I would be very concerned about putting my money in a fund that didn't have some sort of required standard financial reporting practices for all portfolio companies.
Regardless of the legality, responsibility should ultimately fall on the shoulders of the investor to require financial reporting be done in a way that is acceptable to that investor, before they hand over money to the company. This may not be as true in publicly traded companies, where many amateur investors are participating in the market. The same goes for angel investing, if only because many companies at that stage may be pre-revenue or even pre-product. However, at the VC level, millions of dollars are invested to scale supposedly sound businesses. VCs should be sophisticated enough to manage this risk, and if I were an LP looking to put my money in a VC fund, I would be very concerned about putting my money in a fund that didn't have some sort of required standard financial reporting practices for all portfolio companies.