Corporate Compliance Report
Situation Analysis
Introduction
Fraudulent accounting practices are nothing new to the corporate world. In recent years the sheer numbers and the magnitude of these deceptions in recent years has created a public outcry and Congress felt compelled to do something about these abuses.” When business fails to make ethical decisions, when it fails to live up to society’s expectations for ethical behavior, government may step in”(Reed, et.al, 2005, Cchap.2, p.28). In 2002, The Sarbanes-Oxley Act was passed to ensure honesty in accounting practices. This act requires companies to have more independent oversight of their accounting practices. “According to the new act, CEOs and CFOs are responsible for compliance and for certifying the accuracy of financial statements. Failure to do so can result in prison terms up to 20 years and fines up to 5 million dollars”(Schweyer, 2005, p.1).
The main rules for compliances are as follows: “ (1) The establishment of the Public Company Accounting Oversight Board that will oversee the audits of all public companies; (2) Certification of each annual or quarterly reports by the principal executive officer or officers and the principal financial officer or officers; (3) Protection for employees (otherwise known as whistleblowers) who provide evidence of fraud against the publicly traded company that employs them; and (4) Repayment by the executive officers of companies of any incentive pay they receive if the company has to restate financial statements due to fraud” (Wray, 2005, p.1).
Corporations have to hire more employees in their accounting departments and IT departments since much of the work to meet compliance requires ensuring accurate accounting practices and reporting processes. Corporations are utilizing their lawyers to make sure there are within the guidelines of the act. They have to hire independent auditors to review their accounting practices and ensure the corporations are...
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