NCJ Number
66842
Journal
Journal of Accountancy Volume: 147 Issue: 4 Dated: (APRIL 1979) Pages: 110-122
Date Published
1979
Length
13 pages
Annotation
PROVISIONS OF THE FOREIGN CORRUPT PRACTICES ACT THAT SET ACCOUNTING REQUIREMENTS FOR ALL BUSINESSES REGISTERED OR REPORTING TO THE SECURITIES AND EXCHANGE COMMISSION UNDER THE 1934 ACT ARE EXAMINED.
Abstract
THIS GUIDE WAS PREPARED BY A COMMITTEE OF THE AMERICAN BAR ASSOCIATION'S SECTION OF CORPORATION, BANKING, AND BUSINESS LAW AND WAS INTENDED TO HELP MANAGERS, LAWYERS, AND ACCOUNTANTS IN INTERPRETING THE NEW LAW. MANY CRITICS FEAR THAT SECTION 13 (B) (2) OF THE FOREIGN CORRUPT PRACTICES ACT COULD CREATE EXTENSIVE LIABILITIES FOR BUSINESSES THROUGH ITS REQUIREMENTS GOVERNING FINANCIAL RECORDS AND INTERNAL CONTROLS. THIS IS UNLIKELY, ALTHOUGH A RISK OF SUCH A DEVELOPMENT EXISTS BECUASE OF THE VAGUE, SIMPLISTIC LANGUAGE OF THE PROVISION. THE LAW CHARGES MANAGEMENT WITH ESTABLISHING AND IMPLEMENTING AN EFFECTIVE RECORDKEEPING SYSTEM, BUT IT LEAVES THE CHOICE OF METHODS TO BUSINESSES. TO DEAL WITH THE NEW REGULATIONS, EXECUTIVES, LAWYERS, AND AUDITORS WILL HAVE TO WORK CLOSELY TOGETHER. AUDITORS ARE RESPONSIBLE FOR REVIEWING FINANCIAL STATEMENTS AND INTERNAL CONTROL SYSTEMS FOR COMPLIANCE WITH GENERALLY ACCEPTED ACCOUNTING STANDARDS. COMPLIANCE WITH SECTION 13 (B) (2) IS ESSENTIALLY A LEGAL QUESTION AND MUST BE INTERPRETED BY THE LAWYER. THE APPLICATION OF THE NEW ACCOUNTING MANDATES ON PARTICULAR SITUATION ULTIMATELY DEPENDS ON FUTURE JUDICIAL INTERPRETATIONS. THE TEXT OF THE STATUTE IS PRESENTED, FOLLOWED BY AN ANALYSIS OF ITS OBJECTIVES, RECORDKEEPING REQUIREMENTS (WITH REFERENCES TO CONCEPTS OF IRREGULARITIES AND ERRORS), INTERNAL ACCOUNTING CONTROLS, AND SANCTIONS. THE APPENDIX PROVIDES A DETAILED CHRONOLOGICAL ACCOUNT OF THE DEVELOPMENT AND ENACTMENT OF THE LEGISLATION WITH COMMENTS ON AREAS THAT MAY HAVE SPECIAL RELEVANCE TO FUTURE INTERPRETATIONS OF THE STATUTE. FOOTNOTES ARE INCLUDED. (MJM)