Ethical Implications Essay
I completely agree with the fact that the revenue recognition principle should be considered to address the needs of customers. It is crucial to have enough information on revenue, such as when revenue is recorded and reported. In other to avoid any challenges, there is a need for providing control over the accuracy of the information on accounting documentation. I agree that there are many examples of abuse of the revenue recognition principle in today’s business environment. In recent decades, the Securities and Exchange Commiserations has carried out a number of investigations that show ethical violations and ramifications of the revenue recognition principle. Some companies tend to recognize the revenue that has not been earned or to hide expenses that require recognition. It is very important to identify violations of the revenue recognition principle in order to provide competent services and have a positive impact on the performance of the audit. Undoubtedly, financial and accounting reporting should be accurate, valid, and up-to-date (Jones, 2011).
I have to agree with the fact that the revenue recognition principle is considered to be an important rule, which refers to recording the earned income, irrespective of when the associated cash is actually received by the organization. The rule should be recognized to ensure that the actions are ethically and morally acceptable while recording the occurred expenses or earnings. For auditors, it is really very important to follow this principle correctly to avoid any legal ramifications caused by falsified financial statements or other types of deceptive information. As a rule, in the context of publicly held companies and corporations, the shareholders and investors are often the ones affected by erroneous financial statements. Undoubtedly, there is a need for proper control over compliance with the revenue recognition principle. It is required to report any erroneous financial and accounting documentation (Jones, 2011).
Jones, M. J. Creative Accounting, Fraud, and International Accounting Scandals. John Wiley & Sons.