Legality and Ethicality of Financial Reporting

1239 Words5 Pages
Legality and Ethicality of Financial Reporting ETH/376 August 25, 2014 Legality and Ethicality of Financial Reporting Excello Telecommunications has a history of excellent performance but with a surge in oversea competitors the company may not be able to meet its financial estimates for the first time. Executives were worried that not being able to meet the financial estimates could impact stock options, bonuses, and the share price of company stock. While looking to find a way to meet the financial estimates Terry Reed, the CFO, discovers a transaction on December 20, 2010 that might solve the problem. Excello sold $1.2 million of equipment to Data Equipment Systems. This type of transaction would be recorded as a sale on the…show more content…
All CPAs who are members of AICPA are purely governed by the AICPA code of conduct. The code takes into consideration the needs of all financial statement users. Consideration of public interest is the main aim of the code. The Excello accounting department has the duty of following the professional duties, be honest in the financial prospering and protecting the public interest. This means upholding their ethical status and protecting the interest of the public. In response to Reeds request the accounting department came up with three main scenarios they felt met his points of recording the $1.2 million transaction in 2010 and the decision must be defensible from a GAAP view point. They are as follows: 1. Transfers the products to an off-site warehouse owned by Excello by December 31 and hold it until January 11 when it would be shipped to Data Equipment. 2. 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. 3. Offer Data Equipment a 10 percent discount to take the product by December 31. The first one, transferring the product to an off-site warehouse until January 11, is unethical. Despite the fact that the goods are located at an off-site storage facility, the product is still in the hands of Excello. They still hold the legal rights and therefore the sale has not happened. The second one, transfer the product to

More about Legality and Ethicality of Financial Reporting

Get Access