preview

Foreign Corrupt Practices Act Summary

Better Essays

This paper discusses the lack of transparency in the Foreign Corrupt Practices Act’s accounting provisions. Transparency, especially for public companies, is essential in reporting financial information. Users rely on company financial information to make investment and other financial decisions. Congress passed the Foreign Corrupt Practices Act in 1977 following the Watergate scandal. The act addressed a growing trend among companies to hide their illegal acts of bribery by not accurately reporting transactions in their books. The act intended to enhance the value of the auditing process over financial information (U.S. Department of Justice et al., 2012).
The Foreign Corrupt Practices Act (FCPA) contains two accounting provisions: …show more content…

Department of Justice et al., 2012). In the FCPA Resource Guide, the DOJ and SEC provide guidance on internal controls system best practices. This standard includes understanding a company’s work force and regulatory environment. The Guide encourages companies to factor in corruption risk when establishing its internal controls system (U.S. Department of Justice et al., 2012). Despite the recommendations provided in the Guide, companies continue to face regulatory pressure in creating a strong internal controls system (Trace International Inc, 2016).
Despite the aforementioned efforts to strengthen the internal controls provision, violations persist. In 2008, BHP Billiton failed to implement a thorough internal controls system. The SEC report noted BHP Billiton did not prepare or train its employees to handle riskier situations. However, the SEC acknowledged BHP Billiton implemented a few internal controls (U.S. Securities and Exchange Commission, 2015a). This case reflects an uncertainty over the SEC’s inconsistent interpretation of the internal controls …show more content…

However, they are also its greatest risk. Additional surveillance over employees is essential when it comes to engaging in risky activities. BHP Billiton’s employees did not receive proper training. Training is a preventive control to combat high-level inherent risk activities such as bribery. Employees should be well-versed in company policy because their actions may incur liability under the FCPA (U.S. Department of Justice et al., 2012). The hospitality applications in the BHP case highlight this issue. BHP Billiton’s failure to properly account for these applications helped facilitate a bribery scheme. As a consequence, the company faced repercussions in the form of a large monetary fine and mandatory anti-corruption training (U.S. Securities and Exchange Commission,

Get Access