Increase in the Significant Role in Compliance in Financial Service Firms

Corporate governance in itself has no single definition but common principles which it should follow. For example in 1994 the most agreed term for corporate governance was “the process of supervision and control intended to ensure that the company’s management acts in accordance with the interest of shareholders” (Parkinson, 1994)1. Corporate governance code is not a direct set of rules but a self-regulated framework which businesses choose to follow. This code has continued to change in the past 20 years in accordance with what is happening in the business world. For example the Enron scandal caused reform in corporate governance with the Higgs Report which corrected the issues which were necessary. Although it does not quickly fix problems, it gives a better framework to

It is often recommended for (HCO)’s to have a corporate compliance plan to be more efficient, reduce errors, and not have small errors turn into large errors. As (OIG) it’s a necessary and fundamental need to incorporate a corporate compliance plan to have for staff and management to stay organized and lessen the chance of fraud, waste, and abuse in the company. Stated by, (Cleverly, Song, & Cleverly, 2011), it is effective only if it includes management support, effective communication, continuous monitoring, and individual accountability. All these aspects are a continual monitoring requirement as long the corporate compliance is in place for the duration.

Compliance programs are more focused on risk management. The duties include informing staff about the laws and guidelines regulating the business and monitoring adherence to these policies (Nelson, 2012). (Nelson, 2012) By monitoring compliant behavior the programs reduce the episodes of litigation, negative press, loss of support, and confidence from the public(Nelson, 2012).

In order to ensure effective regulation, the Sarbanes-Oxley legislation contains eleven sections that describe responsibilities of corporate boards (Engel, Hayes, & Wang, 2007). In case these responsibilities are not performed, criminal penalties are applied. The need for stricter financial governance laws created the global trend and such countries as Canada, Germany, France, Australia, Israel, Turkey and others also enacted the same type of regulations (Damianides, 2005). Today, the Sarbanes-Oxley legislation continues to play a fundamental role in the process of protecting the rights of investors and supporting a high level of investment attractiveness of the United States and companies that operate in the country. That is why this particular legislation can be considered as extremely benefiting for the national economy as well as investors.

Compliance with Laws, Rules, and Regulations is, to me, the most important area in a company’s code of conduct. Complying with laws, rules, and regulations includes preventing harassment and discrimination, improper payments, and environmental compliance. When companies are in compliance they are not putting themselves at risk of huge fines, lawsuits, and negativity towards their company.

Regulations such as the Insider Trading Act, the Dodd-Frank Act, and Sarbanes-Oxley Act of 2002 (SOX) enhance protection and eradicate unethical business practices. Despite the various laws in place to protect individuals, just turn on the news, read the paper, or glance online at the numerous corporate scandals. Enactment of legislation such as SOX and the Dodd-Frank Act endeavored to restore the public’s trust. Do these rules mitigate the risk, or are they burdensome on broker-dealer such as Group Capital? While laws exist to protect consumers, investors, and shareholders, the question remains are they excessive. The sustainability and ramifications of financial regulation receive minimal thought, and the possibility of future crises garners even less consideration. Kaal (2013) indicated a sense of urgency around rule-making, yet it may not allow a full evaluation of the effect on a broker-dealer. Many of these decisions consider the economic, political, and legal costs on society and not the impact on businesses. Regulators need to balance consumer protection without being punitive towards the financial industry. These factors need balance, or they could stifle business

The Sarbanes Oxley Act of 2002 marked a significant change in the world of business with relation to auditors and public companies. In this paper, I will discuss the causes that led to the creation of the Sarbanes Oxley Act as well as key sections of the act that impact auditors and their effect on public companies and investors. I will also address the impact of the auditing standard no. 5 and how it pertain to auditors and public accounting firms.

Discuss the challenges related to regulating a complex global financial firm and make suggestions for regulatory improvements.

Despite these efforts, the Compliance program’s administration has continued to displayed deficiencies. This is evident by the violations noted at this examination, and the inadequate implementation of effective corrective actions related to MOU provisions and prior examination and audits findings, and recommendations. Turnover at the Compliance Officer position and ineffective Board and senior management oversight contributed to administration deficiencies. Due to inconsistent oversight of the Compliance program, adequate training, sufficient procedures, as well as effective monitoring have not been effectively implemented in areas where deficiencies are identified though audits and examinations. As illustrated by the examination findings,

What constitutes a good company and how business is conducted have been drastically redefined to measure not only performance, but increasingly an importance is placed on compliance records. This was due to the corporate scandals and collapse of major financial institutions which then resulted to a more exacting and stringent reportorial rules and corporate ethical behavior.

• Compliance: Evaluating adequacy of compliance risk management and assessing banks’ effectiveness in identifying and responding to risks posed by new products, services, or terms. Examiners will also assess compliance with the following: – new requirements for integrated mortgage disclosure under the Truth in Lending Act of 1968 and the Real Estate Settlement Procedures Act of 1974. – relevant consumer laws, regulations, and guidance for banks under $10 billion in assets. – Flood Disaster Protection Act of 1973 and the Service members Civil Relief Act of 2003.

Shared governance is important to compliance in order to keep all staff accountable for compliance measures. Shared governance is an organizational model that gives all management and staff control over their actions and practices and extends the influence of administrative areas (Hess, 2004). Giving all managers a voice can help improve governance compliance and operations by promoting teamwork and accountability among staff throughout the entire organization.

During the1980s, there were some significant scandals related to Saving Loans and Association (S&Ls) and a few significant audit failures occurred. In preventing those fiascoes from happening again, the National Commission on Fraudulent Financial Reporting (NCFFR) had established in 1985, which the commission was James C. Treadway Jr. The NCFFR intended to study the elements that can lead to financial frauds and to develop recommendations on internal control for public companies, the US Securities and Exchange Commission (SEC), other regulator and educational institutions. COSO was established in the same year and it became the Committee of Sponsoring Organizations of the Treadway Commission. COSO is a private sector that was

Financial regulation is necessary and without an efficient set of regulations a country could see rises in unemployment, interest rates, and the deterioration of financial intermediaries. With the globalization of the financial industry, it becomes more and more common for businesses to seek financing outside of their county 's boarders. These innovations in the financial industry stress why it is so important for regulations to be created and changed to reduce risk and asymmetric information in financial systems.

The purpose of this paper is to highlight the role of external auditing in promoting good corporate governance. The role of auditors has been emphasized after the pass of the Sarbanes-Oxley Act as a response to the accounting scandal of Enron. Even though auditors are hired and paid by the company, their role is not to represent or act in favor of the company, but to watch and investigate the company’s financials to protect the public from any material misstatements that can affect their decisions. As part of this role, the auditors assess the level of the company’s adherence to its own code of ethics.