The treatment of revenue in accounting processes within organizations is one that raises gray areas as well as apparent cut ethical and legal issues (Mintz & Morris, 2011). The requirement for the reliability of the accounting information presented is one that is increasingly becoming important, and this fact has been underscored by the introduction of various rules and regulations, including the Sarbanes-Oxley Act. The main crux of the Act is to ensure that any revenue reported is one that is accurate and represents the company’s actual position (SEC, 2003). Revenue Recognition Revenue recognition forms the ethical and legal issues to be analyzed in the present scenario involving United Thermostatic Controls Company. Revenue recognition is pegged upon the requirement that revenue can and should only be recognized if it has been received, or it can be realized and earned at the time of recognition (Thornton, 2011). Pertinent to the present case is the illegal and unethical practice of revenue recognition that is improperly timed. There are various categories of fraudulent and dishonest revenue recognition accounting that are often utilized in going around the proper revenue recognition requirements. The issue that raises both legal and ethical concerns is the misuse of the “bill, and hold” kind of sale that is utilized by United Thermostatic controls Company in its sales operations. The basic premise of the use of bill and hold transactions in improperly recognizing revenue is that the selling entity knows as a sale a deal even where the customer has yet to take ownership or bona fide title of the product, and neither assumes the risk nor rewards accruing from the acceptance of claim in the goods (SEC, 2003). In this particular scenario, it is evident that this is what is happening. The utilization of this specific method in recognition of revenue is, however, not entirely unethical and illegal. If particular criteria are met, then the revenue recognition would be held as valid and legal. The requirements will be discussed step by step in both scenarios presented in the present case. Shipment to Allen Corporation The reporting of the above transaction as a part of revenue for the quarter ending December 2010 was an erroneous recognition of revenue. This is based on the fact that for income to be considered in this scenario, three principles have to be met. The first principle is that at the time of the recognition of revenue, the seller must have assumed the risks and rewards about ownership and control of the product (SEC, 2003). In the present case, the agreement indicates that control of the shipped product would only be taken by Allen Corporation on the agreed date, on the 1st of February 2011. Therefore, at the time of the shipment, there was no conceivable way that the customer would have assumed the risk and reward of ownership. The second principle is to the effect that such recognition of revenue only becomes valid if the terms of the sale have been met (SEC, 2003). In this particular scenario, all the terms of the agreement have been met except for the date of shipment. Therefore, this negates such a principle. The final principle that would allow for the valid recognition of revenue in this scenario is that for the income to be legitimately