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Ethics 376

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Legality and Ethicality of Financial Reporting 2-25-2013 Ethics 376 Phoenix University

Unethical Practices are forbidden in every industry but at the same time they are also performed. Unethical practices occur when a business does “not conform to approved standards of social or professional behavior”. ("The free dictionary,") There are many situations that can lead to unethical practices and behaviors within the accounting profession. The Sarbanes Oxley Act of 2002 was put into effect to prevent a lot of these unethical practices. In every business owner’s life, there comes a time when a decision must be made, that if is made in favor of the company and/or for personal benefit will be considered unethical. The business owner is the person who sets the standard for his/her company. He/she is the person who sets up guidelines that demonstrate the contrast between ethical and unethical values and behavior, establishing the first step in creating a company culture emphasizing and reinforcing ethical standards. In the accounting industry, professionals not only have the standard practices of accounting but also, board accountancy rules, such as SOX and GAAP, when creating ethical standards. Federal and state laws play a big consideration during this time. Such a time came for CFO of Excello Telecommunications when he considered inappropriately posting a $2.1 million transaction to boost year-end earnings. At the end of 2010, Excello faced the possibility of not meeting earnings estimates, which affects bonuses, stock options, and shareholders’ earnings (Mintz & Morris, 2011). At this time CFO Terry Reed learned about a transaction that would be recorded as a sale but the buyer requested that Excello hold on to the product until January 11, 2011. According to Generally Accepted Accounting Principles (GAAP), Excello

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