Excello Telecommunications

1382 Words6 Pages
The Ethicality of Excello Telecommunications Cody S. Smith ETH/376 April 22, 2013 Ding Hardin The Ethicality of Excello Telecommunications Excello Telecommunications has been a profitable company for many years, but recently the competitive landscape has become tougher. Competition from overseas manufacturers has lowered Excello’s market share and profits. For the first time it looks as is Excello will not meet earnings estimates. This information directly impacts bonuses, stock options, and the company’s share price. Top level management is concerned about the extent this impact will have on the company. This paper will serve to determine the ethicality of Excello’s actions and demonstrate what ethical standards and regulations…show more content…
In this case the CFO is knowingly omitting a material fact to improve the company’s financial statements. The second option the accounting team came up with was to transfer the product to Data Equipment by December 31 and agree that the customer could return it for a full refund after it arrives at Data Equipment’s warehouse. This option is very unethical. Essentially Excello wants Data Equipment to purchase this product and take delivery of this product prior to December 31, 2010 but will allow Data Equipment to return the product for a refund after the new year. This option seems to be set-up for failure. Excello wants to record this transaction so badly; they are willing to refund this purchase after the new year just to show an additional sale for 2010. This option puts Excello at risk to start 2011 in the black. Having a sale this large returned will be hard to recover from. This option does not violate the revenue recognition principle, but does violate section 401 of the SOX act. Unless the company discloses this information on the balance sheet, Excello would violate this section of the ACT. As for violating the AICPA code of conduct, this option is not part of an ethical practice. It is similar to a salesperson buying a product themselves to attain something in return, and returning the product the next
Open Document