Ethics Case 3-3: United Thermostatic Controls Case

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Legality and Ethicality of Corporate Governance
ETH 376
Ethics Case 3-3: United Thermostatic Controls Case

The purpose of this paper is to evaluate the legality and ethicality of the corporate governance activities that occurred in an ethics case presented in the text. The paper will provide relevant details regarding the legality of the activities, the criteria by which Sarbanes-Oxley would apply to this case, the ethicality of the activities, whether or not the activities were equitable to internal and external stakeholders, and the next steps representing best interest of all stakeholders.
Corporate governance is a commonly used phrase to describe a company’s control mechanisms to ensure management is operating according to
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These scandals shared characteristics of skewed reporting of financial transactions. Congress hoped the Act would address the problems by holding senior management accountable for financial transactions and require more involvement from the board of directors. Several provisions of SOX are aimed toward strengthening corporate governance regarding antifraud efforts. Misreporting of the sales creates a false sense that United Thermostatic Controls met their budgeted sales numbers. Misreporting revenue violates multiple sections of SOX Act placing United Thermostatic Controls at risk. According to the SOX definition of internal control over financial reporting, United Thermostatic Controls is in violation because the company cannot provide reasonable assurance that the financial statements were prepared for external purposes in accordance with generally accepted accounting principles specifically pertaining to the disposition of assets possessing a material effect on financial statements.
United Thermostatic Controls has a responsibility to itself and the public to report accurate financial results. Because the company does not have the expressed or implied consent of the customer, United Thermostatic Controls should reverse the revenue entries and record as unearned revenue. Although the internal stakeholders at United Thermostatic Controls may face repercussions not meeting the forecasted earnings, the company has an unyielding commitment to honor public trust

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