Solutions Network Inc Sample Essay.
Title of Paper
WK5; APPLY: SIGNATURE ASSIGNMENT
Course/Number: Ethics 577
Due Date: 08/02/2021
Case 7 – 2 Solutions Network, Inc.(a GVV Case)
Overview: Making untrue or misleading statements of material fact in violation of the Securities Exchange Act of 1934, Section 10(b) is punishable, but they’ve provided guidelines about when may an entity recognize revenue and how much revenue may an entity recognize. Throughout the inception of this course up to date, we have realized how integrity enables CPA to withstand pressures and avoid subordination of judgment. Leaders of organizations who may not be successful at what they do and see themselves as ethical and moral still cultivate blind spots. Blind spots are the gaps between who you want to be and the person you actually are. In other words, most of us want to do the right thing- to act ethically- but internal and external pressures get in the way.
Questions like which ethical reasoning methods can help Sarah to make ethical decisions when confronted by Paul(who has received message from the top to manipulate the financial records to enable them meet the analyst’s expectations, improve the share price of stock, increase year- end- bonuses, and to keep the confidence of the stakeholders.
Some Considerations/analysis of Solutions Network Case
- Sarah has to be concerned because of the last minute nature of the transaction held on the 28th December 2015. Auditors are skeptics; therefore, they might want to ask a lot of questions about how such a huge contract was carried out during the latter part of the accounting period. However, Solutions Network can get away from it because the sale was not a package deal with DSS who agreed to ship similar software 30 days later to Software Network. The initial transaction was legal and complete because it meets all the GAAP requirements for revenue recognition
- So the concerns of Sarah for connecting the transactions to the later 30 days reciprocate business cannot be technically related to 28 December 2015 down deal. However, Nothing stops Sarah from seeking advice from Shannon..
- Proper ethics in revenue recognition is to recognize and report earnings in the financial statements when the costs are known and the customer is ready to pay the bill. Unethical accounting is when the expectations of AICPA rules and principles are not followed. Recognizing revenues at the time of contract signing before even shipping the product after which earnings may also never materialized or happen due to the customer unreliability. Basically, there are two methods of recognition; sales method and percentage of completion method. The sale method recognize revenue at the moment of sale, ie, the moment of sale when goods and services are wholly transferred to the buyer, as for cash or on credit terms agreed.
SEC SAB 101 outlines. Materiality is a grey area of accounting; consequently it is subject to different interpretations. Sometimes, publicly traded companies resort to questionable accounting practices with seemingly immaterial effects but that practice allows the company to meet on beat analysts earnings expectations, thereby creating a qualitatively material effect,
More clarity when defining revenue is permissible. Due to the expectations of Sarah’s professional skeptics and judgment, she can privately seek an advice from a peer group to weigh in the would be consequences if she obliged to carry out the instructions from the top through Paul or just pack her way out to avoid future repercussions. However, there are instances where companies can take advantage of revenue recognition directives as per the GAAP.
Sarah can take advice of Shannon and consider her views as the later can also enrich her knowledge about some of the techniques that organizations adopt in order to keep up with the stock market as long as there’s going to be no misstatements or restatements that the external auditors who would be auditing their financial records from the January 15. The December 2015 sale was complete as FOB has been sanctioned in the case, and it may not have anything to attach to Solutions Network acquiring different set of technology of which DSS controls it over all other broader spectrum.
Seeking the advice would also enable her to realize when and what would be expected from her as being a controller who is joining the bandwagon of manipulative strategies to sustain the “Big Game” as described by Leavitt
Sarah’s Most Persuasive Responses to reasons
I think Sarah should be able to draw the attention of Paul to the manipulative means to paint the accounts in bright colors to enable meet the expectations of analysts, increase earnings per capital, making more bonuses. Sarah should be able to let Paul realize about their responsibility to the public interest as CPAs to encourage proper accounting reporting that would show what is actually going on rather than succumbing to the dictates of analytics expectations and pressure from the top.
The top management should be able to promote ethical culture by setting the ethical climate from the top but instead, if they are going to concoct diabolical ways to stay in business, it is going to plunge our careers into chaos as auditors are all out to detect fraud and irregularities.
Although, in business management, earnings management is the use of techniques to produce financial reports but it only show the bright side. It only shows more consistent profits each month, quarter and year.
However, the term ethics is a branch of philosophical knowledge of ideas about what is morally good or bad. It deals with the ideas of what is a good and bad behavior. It can generate responsibility, fairness, canny, respect and good citizenship. It helps to promote a good foundation for making better behavior rules. These foundations and guidelines help clarify the issues involves in a given situations. It has a margin role in making ethical decisions in management.
Management of the companies are required to follow the require element as stated under Sarbanes Oxley Act 2002 in which all internal controls policy.
Virtue ethics examines reasons for the earning management decision making and the action itself. It may seems to appear that, Sarah is becoming too suspicious about her boses and she was treading carefully by avoiding getting herself involves in unethical manipulations,
The legal right, responsibilities of accounting is the ethical responsibility an accountant has to those who rely on his or her work. An accountant’s responsibility may vary depending on the industry and type of accounting, auditing, or tax preparation being performed. All Accountants must perform their duties following all applicable principles
2.Mintz S. & Morris R. (2017). Ethical Obligation and Decision Making in Accounting. Text and Cases, McGraw Hill. New York. NY.
3.Harvard Business Review/Business Ethics