June 25, 2012
United Thermostatic Controls This paper will show the legality of the activities that happened within United Thermostatic Controls based on federal, state, and local laws. As this case is examined the Sarbanes-Oxley act will be discussed as it played a role in this case because United is a publicly owned company. Also this paper will show the ethicality, if the activities were equitable to internal and external stakeholders, and what is the next step based on everything that has happened. Ethics is something that should always be at the forefront of every decision a company makes because if an unethical act is committed it will come out at some point, and tragic circumstances can come from the act.
First this paper will discuss the legality of the activities that transpired in the United case based on federal, state, and local laws. The legal issue present in the United case is the revenue recognition principle. United’s director of the southern sales division, Frank Campbell, reviewed purchase orders for the end of the year to determine if shipments could be made to customers prior to year end. Campbell looks at it that this could simply be fixed by accelerating production and shipping to increase sales revenue for the current fiscal year (Mintz & Morris, 2011). Campbell chooses to go ahead with the shipments that caused an increase in the revenue by 150,000; however, during test controls the internal audit staff questioned the recording of the shipments during the fourth quarter (Mintz & Morris, 2011). The first shipment was to customer who had specified that the earliest they could received the shipment was February 1, 2011; however, the thermostats were shipped and billed on December 31, 2010. The second shipment was to a customer who had specified no partial shipments; however, United shipped them half of the order and recorded the revenue within 2010. When revenue
References: Mintz, S. M., & Morris, R. E. (2011). Ethical obligations and decision making in accounting. (2nd ed.). New York, NY: McGraw-Hill/Irwin. Phillps, T. J., Luehlfing, M. S., & Daily, C.M. (2001, June). The Right Way to Recognize Revenue. Journal of Accountancy, Soxlaw. (2006). Retrieved from http://www.soxlaw.com