Essay: Inappropriate Recognition of Revenues

Sample Essay

The merchandise shipped to the distributors also included several products which were either obsolete or had a very low ratio of resale which meant that there was a high probability that these products would be returned or sit in distributor warehouses where eventually they would not be sold and the related loss would have to be recognized by ClearOne.

The CEO also started hiding merchandise in garages of non distributors and company warehouses in order to clear inventory from the company. The management also tried to ship products to an Australian distributor who eventually refused acceptance of the shipment. The inappropriate recognition of revenues resulted in complaint registered with the Securities and Exchange Commission and eventual litigation by the commission against the company. The board needs to ensure that actions and inappropriate accounting practices are avoided in the future (SECP).

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