Legality and Ethicality of Corporate Governance

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Legality and Ethicality of Corporate Governance

This paper will discuss the legality and ethicality of United Thermostatic Control’s (“United”) corporate governance. Given the fact that United is a publicly owned company, the role that the Sarbanes-Oxley Act of 2002 (“SOX”) played in this case will be examined. The discussion will cover various regulations such as the AICPA Code of Conduct, GAAP, and the ethicality of the activities that occurred at United. United Thermostatic Controls manufactures thermostats for commercial and retail users. Like most companies its goal is to achieve increased sales and higher profits for its shareholders. This is particularly important because it is public traded and any drop in sales or deviation from earnings might cause the price of the stock to drop. United is divided into four divisions, Eastern Sales, Western Sales, Southern Sales and USA Sales. With the exception of Southern Sales, all of the other divisions are doing well and meeting expectations. Southern Sales has been experiencing a decrease in its sales and is not meeting the targeted amounts. If the year end financial statements are released and this situation has not improved, it would not only have a negative impact on the market price but it would probably affect management’s bonuses as well. The company will face ethical and legal challenges in how to maximize the last quarter of 2010 to meet sales goals. Frank Campbell is the director of Southern Sales. Realizing that the end of the year is nearing, Frank is desperately looking for solutions that will make the sales numbers look better. There are two orders outstanding that are not due to be delivered until February 2011. Because Frank is being pressured to maximize the reported sales in the fourth quarter of 2010, he pushed the two orders through and had them posted to the books for December.…...

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