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John is CFO at a venture - backed tech startup with revenues of $ 2 0 million and approximately 8 0 employees. He's worked at
John is CFO at a venturebacked tech startup with revenues of $ million and approximately employees. He's worked at the company for several years, and now reports to Ralph, the company's newly hired CEO.The company had been doing really well, but recently big customers have been placing fewer orders and Ralph is feeling pressure to show growth. This pressure is amplified because the company is venturebacked, and the investors expect results.While the company did well in the first round of funding, if they don't perform now, they may have trouble with gaining sufficient funding in the second round, which could mean the end of the company.All of this was on John's mind when Ralph came to him about recording a major order that was still under negotiation. The deal had not gone through, although both parties expectedto complete the deal in the next week. With the current quarter ending in the next few days, including this order would give a significant boost to the company's financial reports. Nonetheless, under the generally accepted accounting principles GAAP itis clear that this order does not qualify as revenue.Even so Ralph was adamant about John booking the order, which could make all the difference in the company's ability to stay afloat. John knew that doing so would constitute fraud; particularly because the Sarbanes Oxley Act requires the CEO and CFO to sign off on all quarterly reports. At the same time, John knew that this order could make all the difference
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