FOREIGN CORRUPT PRACTICES ACT - ITS IMPLICATION TO FINANCIAL MANAGEMENT

• NCJ Number: 64661
• Journal: Financial Executive Volume: 46 Issue: 8 Dated: (AUGUST 1978) Pages: 26-32
• Author(s): D R BERESFORD; J D BOND
• Date Published: 1978
• Length: 7 pages
• Corporate Author: Financial Executives Institute
• Publication Format: Article
• Language: English
• Country: United States of America

Annotation

PRIVATE AND PUBLICLY HELD COMPANIES SHOULD REVIEW THEIR CODES OF CONDUCT, MONITORING PROCEDURES, ACCOUNTING PRACTICES, AND INTERNAL CONTROLS TO COMPLY WITH THE 1977 FOREIGN CORRUPT PRACTICES ACT.

Abstract

ALL UNITED STATES COMPANIES, DIRECTORS, OFFICERS, EMPLOYEES, AND AGENTS ARE SUBJECT TO SEVERE PENALTIES FOR VIOLATING THE FOREIGN BRIBERY SECTION OF THE 1977 LAW. PROHIBITED PRACTICES CONSIST OF MAKING A PAYMENT, OFFER, PROMISE, OR GIFT TO A FOREIGN OFFICIAL OR POLITICAL PARTY IN EXCHANGE FOR ASSISTANCE IN OBTAINING OR RETAINING BUSINESS. THE LAW DOES NOT COVER PAYMENTS TO LOW-LEVEL GOVERNMENT EMPLOYEES TO FACILITATE SERVICES. MULTINATIONAL COMPANIES SHOULD ADOPT OR STRENGTHEN A FORMAL CODE OF CONDUCT TO GUIDE EMPLOYEES AND INSURE THAT ITS PROVISIONS ARE COMMUNICATED TO MANAGERS. SUCH CODES COULD DEAL WITH CONFLICTS OF INTEREST, RELATIONS WITH CUSTOMERS AND SUPPLIERS, AND RECORDKEEPING SYSTEMS. METHODS OF MONITORING COMPLIANCE SHOULD BE EXAMINED, PARTICULARLY CONTROL OVER AGENTS AND CONSULTANTS. AN AUDIT CANNOT ALWAYS DETECT ILLEGAL ACTS AND THE NEW LAW SPECIFICALLY PROHIBITS ANYTHING OF VALUE BEING USED FOR BRIBERY. IN ORDER TO PREVENT CONCEALMENT OF FOREIGN CORRUPT PAYMENTS, PUBLICLY HELD COMPANIES HAVE TO DEVISE INTERNAL CONTROL SYSTEMS TO COMPLY WITH RECORDKEEPING STANDARDS. NO DEFINITE CRITERIA, HOWEVER, EXIT FOR MANAGEMENT TO EVALUATE INTERNAL CONTROL SYSTEMS, AND AUDITOR'S GUIDELINES ARE NOT SUFFICIENT. CRITICS FEEL THAT CIRCUMVENTION OF THE SYSTEM IS THE PROBLEM AND WILL NOT BE PREVENTED BY INTERNAL CONTROLS. MANAGEMENT CAN DETECT FOREIGN ILLEGAL PAYMENTS BY EXAMINING FEES PAID TO AGENTS, CONSULTANTS, AND DISTRIBUTORS AND CHECKING FOR UNRECORDED CORPORATE FUNDS. INTERNAL AUDITORS CAN ASSIST IN MONITORING CONTROL PROCEDURES. MANAGEMENT SHOULD DOCUMENT ITS INTERNAL CONTROL OBJECTIVES AND METHODS. THE LAW DOES NOT ALTER EXISTING SECURITIES AND EXCHANGE COMMISSION REQUIREMENTS CONCERNING QUESTIONABLE AND ILLEGAL CORPORATE PAYMENTS AND PRACTICES. EXAMPLES OF A CODE OF BUSINESS CONDUCT AND A MANAGEMENT REPORT TO STOCKHOLDERS ON INTERNAL CONTROLS ARE PROVIDED. (MJM)