Foreign Corrupt Practices Act Of 1977

In today’s ever changing and competitive modern world of business, it is critical for the companies to have activities internationally. In order to prohibit frauds and illegal activities, several acts and documents have been elaborated. One of the documents is Foreign Corrupt Practices Act that has been enacted in the 1970’s, as a result of SEC investigation of several U.S. companies that made illegal payments to foreign governmental officials, politicians, and political parties (Barnes 73). The FCPA had a critical impact on the way U.S. firms do business. Companies that did not comply with FCPA have been subject of criminal and civil enforcement actions that later resulted in huge fines and sentences for

The globalization of business activity has resulted in the need for a uniform set of accounting rules in all countries. With U.S. corporations doing so much business in other countries, it is imperative that the SEC and international regulatory boards devise a set of rules and regulations that would benefit both parties. If this did not happen, international companies would be able to do whatever they wanted without repercussion because of the discrepancies in the differing sets of rules. Accomplishing this universal set of rules would allow companies to list securities in any market without having to prepare more than one set of financial statements. There have been so many

According to Benston (1977) an unaware public pays for government-required accounting disclosure. Sunstein (1999) claims that disclosure of information allows the federal government to control public and private conduct. Foreign Corrupt Practices Act Over the decades accounting regulations have come from various sources. The Securities and Exchange Commission as well as the Internal Revenue Service and Interstate Commerce Commission are examples of regulatory bodies that promulgate accounting regulations. A more recent example occurred during the 1970s. During the Watergate era there were a number of investigations, some of which affected American business. One of the investigations, conducted by the Securities and Exchange Commission (SEC) in 1975, revealed that 19 publiclyheld corporations had made illegal campaign contributions and that these contributions were made from cash accounts that had not been recorded on the corporation’s books. (Heldack, 1977) This prompted the SEC to launch an investigation into what were considered ―questionable payments.‖ What came out of the investigation was that many U.S. multinational corporations were making hundreds of millions of dollars in ―questionable payments‖ to foreign officials to obtain business. As a result, the Foreign Corrupt Practices Act (FCPA) was unanimously adopted by Congress in 1977. Bribery of foreign officials to obtain business for the corporation

SFAC No. 8 addresses the cost constraint on useful financial reporting, “Cost is a pervasive constraint that standard setters, as well as providers and users of financial information, should keep in mind when considering the benefits of a financial reporting requirement.” (SFAC No. 8 BC 3.47) However, the ability to place a dollar value and fully enumerate a cost or benefit is almost an impossible task for standard-setters. Additionally, there is no way to successfully identify and measure all of the economic consequences associated with a new standard. The FASB should be applauded though for advancing uniformity in accounting standards, however; uniform financial reporting suggests a one size fits all approach. “Smaller, non-publicly listed firms (and their auditors) argue that accounting standards are formulated mainly for larger, publicly traded firms” and that “compliance costs are disproportionately higher and the

Upon reviewing your post, the insights I gain are the importance of companies following the rules and regulations enforced by The Securities and Exchange commission (SEC). In addition to the (SEC) financial accounting are also monitor by the Financial Accounting Standards Board (FASB) regulate the financial statements issued to shareholders. Zimmerman, J. L. (2014). I also realized the importance of companies making certain that the financial information posted, is accurate. By doing so, they help others such as stockholders and investors to make decisions that will be most beneficial to them.

Evidence of bribery or erroneous accounting is enough proof for the government to file a case against an individual or company regardless of intent, under the FCPA laws (Clayton, 2011). There are three types of improper violations for the anti-bribery provision and they include: the issuer, domestic concern, the foreign national and businesses. The issuers are the ones that are registered in the US or are required to file Security and Exchange Commission. Domestic concern is any person or business that has their place of business in the US or is under the US law. Lastly, the foreign nationals and business in which deals with corrupt payments that are made in the United States, there are also the third parties and agents that are as well included and have the same conditions apply to them as they do to the issuer, domestic concern, and the foreign national and businesses. The second provision that is involved with the FCPA is the Accounting provision and that consist of contracts enforcing Securities and Exchange Commission. The SEC enforces the Foreign Corrupt Practices Act (FCPA) by bringing the civil actions against the issuers and their officers, directors, employees, and agents. FCPA has two accounting requirements that are recordkeeping and internal controls. The recordkeeping is there to ensure that the books, records, and accounts are held at the standards of what the company should be at. This is designed to cover business

In 1977, Congress passed the Foreign Corrupt Practices Act (FCPA), which makes it unlawful for U.S. businesspersons or companies to pay, with money or anything else of value, to foreign officials to secure beneficial contracts. The anti-bribery requirements of the FCPA have applied to all U.S. persons since 1977. In 1998, certain amendments were revised and the anti-bribery requirements now apply to foreign firms and persons who cause an act in continuance of bribery within the United States. The government was attempting to restricted illegal behavior, which is why they implemented the Foreign Corrupt Practices Act after the SEC discovered that over 400 companies were sending corrupt payments to foreign government officials and

The Foreign Corrupt Practices Act of 1977- is a U.S. Federal Law that prohibits any U.S. citizen from bribing a foreign official for the purpose of obtaining

There are two types of bribery provisions. The first prohibits any bribes made directly by the U.S. company. The second prohibits any organization from knowingly arranging for a bribe through an intermediary. Many thought that the FCPA would place U.S. companies at a disadvantage in the

Under the Racketeer Influenced and Corrupt Organization Act (RICO) in a criminal or civil law suit a pattern of racketeering activity must be ascertained by proving at least two acts of racketeering activity have been performed within an interval of ten years. This law could not be upheld in Sedina, SPRL v Inrex Co., 473 US 479 (1985) as two predicate acts could not be maintained (Twomey, 2013).

The act requires management to disclose all material information or changes within their accounting processes. By requiring senior management to review the reports they are held accountable for the financial accounting of the firm, and procedures to prevent employees and other members within an organization from committing fraud or theft and management is legally responsible if material misstatements have been made. By making management accountable then they are less likely to commit fraud if faced with jail time. Management and stockholders frequently have different goals. Management often wishes to expand and use the company’s assets in different ways than a stockholder. Management’s accountability of the financial reports often helps encourage management to use company assets in appropriate ways. Disclosures were also a reduction in risk of fraud because all material information must be disclosed. By requiring this disclosure if a company’s net income increased this year due to a

Corruption is something that can hit businesses very hard. Foreign corruption used to be something that would hurt businesses majorly. Due to this The Foreign Corrupt Policies Act (FPCA) was signed into law on December 19, 1977 by President Jimmy Carter.

Each of these jurisdictions works together to keep aspects of FCPA from being violated. This law is not always prohibiting all payments to the foreign officials. The FCPA has an exception for anti-bribery prohibitions and that is called “ routine government action.” This exception is also given the names “facilitating” or “ grease payment.” The Foreign Corrupt Practices Act defines this “routine government action” as for a foreign official to perform in obtaining permits, licenses, or other official documents that enable then to do business in that country, processing government papers such as visa and work orders, protection services and conducting inspections, and anything that has similar nature (6). The Foreign Corrupt Practices Act (FCPA) has two affirmative defenses and they consist of assertion that payment in question was lawful under the laws of the foreign country, and the assertion that the payment was valued a bona fide expenditure (6). This affirmative defense is aimed to be for the issuer, domestic concern, or other person. In this affirmative defense there must be some type of written law authorizing or supporting the payment. The penalties for violating the Foreign Corrupt Practices Act are different from the provision that they fall under. For an individual and it is from the anti bribery

Public companies issuing securities, public accounting firms, and firms providing auditing services whether they are domestic or foreign must comply with Sarbanes-Oxley. (Sarbanes-Oxley Act Section 404, 2002) Additionally, publicly traded companies with a market capitalization greater than $75 million must comply with these new rules. (Don E. Garner, 2008) A company’s management is required to provide an external auditor with all financial statements for the current review period. Upon reviewing these statements the auditor issues a report classified as unqualified, unqualified with explanation, qualified, adverse, or disclaimer based on what they find or do not find. All public companies reports are available on the Securities Exchange Committees website, below is a sample of what this report looks like. You can imagine what a relief this was for investors, to be able to search any company and find statements solidifying their prospective investment.

1. Describe the economic and social impact of bribes and other similar payments in emerging economics.