What’s Wevenue Essay Example

booking revenue for products that were shipped before customers requested them, and failing to reverse the sale when the product was returned.

Furthermore, distributors were paid "handling fees" to accept products with unlimited return rights, leading to additional sales being recorded. Many times, unethical compromises may initially appear insignificant. However, it is important to understand that significant issues often arise from a series of minor compromises. Therefore, small compromises should not be tolerated as they can ultimately result in severe problems for companies to address.

The article included an instance where an employee inquired with the accounting firm about the possibility of recording revenue for products sold but shipped after the end of the fourth quarter. Although there were discussions about the accounting firm's response, the significant aspect is that Cal Micro posed the question. This signifies that Cal Micro transitioned from desiring to record revenue ahead of schedule (a minor ethical compromise) to falsely recording sales (a major ethical problem). This illustration demonstrates how a minor compromise can progress into a considerably larger and more critical concern for a company.

This example can also be illustrated by the Coopers accountants. When auditors sent confirmation letters to customers with outstanding bills, 33% of the customers who replied raised concerns with Cal Micro’s bookkeeping practices. This seems to be an instance of the accounting firm disregarding a small piece of evidence, but when all small evidence is aggregated, it creates a significant warning sign. This raises the question of whether the accounting firm acted unethically. One could even make the argument that assigning a junior accounting staff member to a company like Cal Micro was unethical, considering the impending

shareholder lawsuit.

Economic cycles make it easier to hide unethical accounting practices during good times. However, when the market downturns, these practices can become more apparent. Therefore, it is crucial to remain vigilant even during prosperous times, as these practices can severely harm a company during difficult periods. Cal Micro's fraudulent behavior started in the late 80s and persisted through the booming technology market of the early 90s. By 1994, the company had accumulated significant debt, making it impossible to recover. During that year, one-third of the company's revenue was found to be fraudulent.

Their attempt to recover by writing off half its account receivables drew the immediate attention of shareholders, who accused them of "financial shenanigans." This triggered the beginning of the end for the unethical accounting practices. Due to increasingly complex accounting rules, identifying abuse of the rules is becoming more difficult. Ethical accountants advocate for full disclosure and transparently communicate a company's real economic performance and position. Internally, many of the Cal Micro executives behaved in a manner or held a position that hindered fair accounting. For instance, the chairman, who owned 45%, also sat on the board's audit committee.

7% of the company's ownership belongs to an individual with a potential conflict of interest, which may have influenced the production of inaccurate reports submitted to the board. Additionally, the CFO, who also held other titles, confessed to fabricating information on his resume. Despite only having taken a college course in accounting and obtaining a low grade (D), he claimed expertise in the field. Furthermore, allegations suggest that the credit accountant produced fraudulent documents and potentially misled the auditors.

The roles of morally compromised executives

led to unethical behavior, which may have been difficult for the offenders to recognize. When management instructs employees to engage in actions like document falsification or destruction, it creates ambiguous situations that make it challenging to identify unethical practices. In conclusion, this case highlights the blurred responsibility boundaries for both auditors and companies.

The text highlights the multiple interpretations of laws and the lack of penalties for both companies and auditors. This could lead to minimal efforts being made. The need for a clearer definition and stronger consequences for unethical behavior is emphasized.