Excello Telecommunications

Topics: Enron, Business ethics, Law Pages: 1 (331 words) Published: July 22, 2013
Excello Telecommunications has been a profitable company and because of increasing competition they have realized that their earnings that were estimated will not be met. Management is now worried how this will affect the company’s future with investors. A big sale has been made right at the end of the year and this sale could be the difference in making or breaking the company. The problem is that the buyer cannot purchase the items until right after the end of the year which will not then be reported in this year’s accounting period. The CFO is now asking for ways to post this sale to this year’s books to show a profit and attract investors. In this paper we will examine the possible solutions and explain their ethical fallouts as well as federal laws that are of an issue. Legal Issues and Laws

Yes there are a few federal laws that Excello needs to follow for the reporting of these transactions legally and correctly into their financial statements. Most important are the Sarbanes-Oxley act, the AICPA Code of Conduct and the Generally Accepted Accounting Principles. The accounting team has been asked to find ways around the system but the team needs to take into account that these laws and regulations have been made in their best interest for them ethically and for their clients’ future in business. SOX

The CFO of Excello wants to put the sale of equipment in the end of the year so that it is counted on this year’s income however the company purchasing the equipment does not have the space to hold the merchandise until after the first of the year and therefore will not make the purchase until then which then does not allow for the dollar amount to be reported until next year’s books. Unethical practices that could take place here are recording the sale before it actually takes place. The provisions to these are Section 302 corporate responsibility for financial reports.
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