Excello Telecommunications Ethics 376 Essay

1247 words - 5 pages

Excello Telecommunications Ethical Obligations
Jonathan Carpenter
November-3, 2014
Susan Paris

Excello Telecommunications Ethical Obligations
Up until just recently, Excello Telecommunications has been a very successful business that has never had to worry about unethical implications until competitors took away from the income that was expected to be reported for the end of the fiscal period. The failure to reach the expected estimates for the year has the company leaders worried about investor confidence, stock prices and the yearly bonuses for management. Being back into a corner, the companies CFO, Terry Reed, has decided to book the 1.2 million in sales regardless of the laws ...view middle of the document...

Because of SOX, there is no longer corporate plausible deniability. Once the reports are made and Reed signs his name to the financial reports, he is liable to face any and all penalties for not complying with regulations.
When looking at the principles outlined by the Generally Accepted Accounting Principles or GAAP, Reed must comply with how the financial reports are documented. If Reed were to report the 1.2 million in sales as planned, he would then violate the accrual basis principle of GAAP which states that revenues can only be reported when they are earned. Reed fails to comply with this principle simply because the plans to report this transaction before the company has received the product and signed off agreeing that they will pay for the product. Going further into GAAP, all documentation must be reliable and consistent with prior financial reports. The reliable and consistency principle is what sparks investor confidence within a certain company. If Reed were to manipulate the financial reports, the information provided would mislead investors and cause them to place their money into a lie which could start a downfall of the company once it is realized that the documents are not consistent with the prior year’s documents.
Finally, Reed is faced with the AICPA Code of professional Conduct. After the scandals of 2002, the AICPA created a set of guidelines that companies must follow in order to make ethical decisions when faced with challenging circumstances such as Excello Telecommunications is facing at this point. The AICPA Code of Professional Conduct provides seven principles that state what a company must do in order to remain ethical. In order to remain compliant of the AICPA Code of Professional Conduct, Excello must follow professional duties, protect public interest and be honest with financial reporting. Following these three simple rules when making the final decision will allow Excello to maintain a good ethical status.
Regardless of the ethical implications as well as the laws and regulations provided by SOX and GAAP, Reed wants to report the sale of 1.2 million in products in the 2010 accounting period no matter the cost. Reed knows that by doing so, management will still receive their bonuses, stock prices will remain high and investor confidence will still be with Excello. By demanding this final outcome on the 2010 accounting period, the accounting department decided on three different scenarios that the company could play out. First solution is to go ahead and report the sale and move the inventory to an offsite storage facility. This way, when the company...

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