Thus, te deception and violation of transparency make them liable to clients and third parties and could even cause them a negative corporate image in the long run for fraudulent recording. Te criteria by which the SOX Act would apply to the case was noted in terms of the potential misstatement in recording the revenue for the period despite knowing that it has not yet been earned. A explicitly noted, tere are “four perspectives to help CPAs meet their responsibilities under the act including (1) the actual financial or error, 2) an internal control deficiency caused by the failure in design or operation of a control, 3) a large variance in an accounting estimate compared with the actual determined amount, ad (4) financial fraud by management or other employees to enhance a company’s reported financial position and operating results” (Mintz & Morris, 2011, p From the perspectives, i is clear that Excello Telecommunications would be violating the recording of the revenue recognition principle, a well as the alleged intent to commit financial fraud by the CFO, Tm enhance the company’s reported financial condition by the end of the fiscal period December 31, 2010.
Te financial reporting standards required compliance to the revenue recognition principle as stipulated under the GAAP. I was clear from case facts that due to the fact that for the first time in their earnings history, te earnings estimates would not be met, Tm Reed could be questioned by the Board of Directors and members of the executive time as to the reasons which hampered the realization of projected earnings. A such, avoid and inquest, Red resorted to conniving with Fuller in trying to find out alternative courses of action which could achieve his defined objectives: t record the $1.
2million as revenue in 2010 as well as to ensure that the course of action could be defensible from the perspectives of GAAP (Mintz & Morris, 2011). Te standards on revenue recognition and the apparent commission of financial fraud by the CFO to enhance the financial condition of Excello Telecommunications were evident. I and when Fuller would agree to recognize revenue as within the 2010 fiscal year, te action and entry would be a gross violation of the (American. ..
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