The association between corporate governance and financial reporting quality is a fundamental topic

However, not all companies succeed to comply with all regulation, even though apparently it looks that all operations are lawful. For instance, United States vs. Kay case, No. 05-20604, 2007 U.S. could lead to broader enforcement actions under the FCPA (“FCPA Gets Broader Reach”). The company President (Douglas Murphy) and Vice President for Caribbean Operations (David Kay) at American Rice, Inc. took several steps in order to reduce sales and taxes costs to rice exported to Haiti. Even though their actions included paying officials to resolve tax issues, underreporting imports to reduce duties and taxes, paying officials to accept the underreporting, the district court granted a motion to dismiss the indictment, holding that the scope of FCPA did not extend to paying foreign officials for the purpose of reducing taxes. In contrast, the court of appeal reversed in United States vs. Kay, holding that bribes paid to foreign officials in consideration for unlawful evasion of sales taxes fall within FCPA. As a result, the jury found Kay and Murphy guilty of violating the FCPA by paying foreign officials to retain their business in Haiti (“FCPA Gets Broader Reach”). Moreover, the court rejected defendants’ argument that its interpretation of the FCPA extended criminal liability under the statute

When the U.S. stood completely alone in its legislative quest to curtail foreign bribery, the catastrophic scenario did not materialize. “As the Government Accountability Office (GAO) noted four years after the implementation of the FCPA in a study called the Impact of the Foreign Corrupt Practices Act on U.S. Business; claims that U.S. companies have lost sales…are difficult, if not impossible, to substantiate and quantify” (Graham, 1984).   Further, a paper published in the Journal of International Business used published data to test the competitive disadvantage theory and found that “the FCPA had not negatively affected the competitive position of American industry in the world marketplace” (Graham, 1984).   Even then, when the American industry was the only one worldwide facing these kinds of restrictions, anti-bribery laws did not negatively impact their export performance or market share.

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

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

America has always been a land of freedom, prosperity, and rules. Save the times of the Wild West the United States government has attempted to exude a persona of ethicality. It seems that whenever a financial crisis/fraud/bribery scandal arises new laws are passed to help prevent future problems. Such is the case with the Foreign Corrupt Practices Act - passed with the purpose of keeping companies that do business in the US ethical in their business dealings. The main purpose of the act is to prevent companies from paying bribes to foreign officials, though there are other provisions included. It is only fitting that Wal-Mart, the largest retail store in the United States (2013 Top Global Retailers) has had allegations of wrongdoing related to the act. Wal-Mart was reported to have paid over $24 million in bribes to officials in Mexico. Why would Wal-Mart need to be bribing Mexican officials when they are so large and powerful themselves? And how did the US government get involved? These questions are the purpose of this paper.

The FCPA was enacted as legislation so as to prevent American corporations from bribing foreign officials. All corporations who are listed and traded on the stock markets in the United States must comply with the reporting and accounting standards as required by the SEC.

The United States Department of Justice and the Securities and Exchange Commission rarely enforced the Foreign Corrupt Practices Act, enacted in 1977, until 2010— over a decade since its modern reform in 1998. This surge in penalization of unethical acts such as bribery and other methods used to ensure foreign business ventures has been called a “new era of FCPA enforcement” by the DOJ, resulting in $1.8 billion in payments accrued from domestic firms and their foreign partners, compared to $300,000 in 2000 (Kohler). Because of ambiguity within the legislation, especially the undefined terms “foreign official” and “obtain or retain business,” the U.S. government is able to manipulate the FCPA for monetary gain, as well as shape foreign economies based upon their own values.

Congress enacted the FCPA to bring a halt to the bribery of foreign officials and to restore public confidence in the integrity of the American business system. The FCPA was intended to have (and has had) an enormous impact on the way American firms do business. Several firms that paid bribes to foreign officials have been the subject of criminal and civil enforcement actions, resulting in large fines and suspension and debarment from federal procurement contracting, and their employees and officers have gone to jail. To avoid such consequences, many firms have implemented detailed compliance programs intended to prevent and to detect any improper payments by employees and agents. The FCPA prohibits any American citizen to be involved in committing any bribery for business issues. Paying or receiving money or anything of value makes it against the law and punishment should be enforced by the government in order for justice to take place. As mentioned in the Lay-Parson’s Guide to FCPA, “The anti-bribery provisions of the FCPA make it unlawful for a U.S. person, and certain foreign issuers of securities, to make a corrupt payment to a foreign official for the purpose of obtaining or retaining business for or with, or directing business to, any person. Since 1998, they also apply to foreign firms and persons who take any act in furtherance of such a corrupt payment while in the United States.”

On February 16, 2016, the United States Securities and Exchange Commission released a statement announcing the settlement of a case concerning a technology company’s violation of the Foreign Corrupt Practices Act (FCPA). The software company PTC Inc. came under SEC investigation when it was discovered that two of its Chinese subsidiaries provided Chinese government officials with non-business related trips to places like Hawaii and Las Vegas, as well as improper gifts, including iPods, gift cards, and wine in order to win business. This act comes in direct violation with the Foreign Corrupt Practices Act which prohibits that all U.S. companies and their subsidiaries of bribing foreign officials in an effort to gain business opportunities (Clarkson, Miller, Cross 108). A case like this can play a significant role in the reputation of a company and how it is viewed not only on a domestic scale but an international scale as well. However, PTC’s responsible handling of the situation allowed the company to address and take care of the issue while maintaining

Before passing the FCPA, the government found that more than 400 companies had paid millions of dollars in briberies to foreign government officials to secure businesses overseas. It has been reported that firms have secretly used the money to illegally contribute to the United States and make illegal payments to

A company discloses their financial reporting and other financial information with their shareholders, creditors, financial analysts, and employees. The creditability of a company’s financial information hinges on its internal control of effectively adhering to governing regulations. According to Epstein (2014) the Sarbanes-Oxley Act of 2002 was established to eradicate companies from submitting fraudulent financial reporting. “The Sarbanes-Oxley Act changes management’s responsibility for financial reporting significantly. The act requires that top mangers personally certify the accuracy of financial reports” Blokhin (2018). This improves the quality of financial information being presented permitting decision makers the ability to have

Knowingly committing and concealing fraudulent activities is undoubtedly illegal. If I were a manager during this scandal, my initial focus with my employees would have been centered around ensuring all employees understood and adhered to all laws associated with the reporting and manufacturing of our products. By creating a common understanding (Proverbs 4:7), it increases the likelihood that employees will have the same ethical baseline. If we don?t have this focus, James Lewis vs. Caterpillar bulldozer vs Whayne Supply Company confirm that the legislative exposure and jurisdiction is inherently broader (Kubasek, 2016).

Six years later, Walmart disclosed FCPA investigation beginning the internal investigation into whether certain matters, including permitting, licensing and inspections, were in compliance with the U.S. FCPA. In 2012, the Walmart bribery scandal 2.0 went public as the allegation of The New York Time was that Walmart Mexico, under the direction of the then country CEO and his General Counsel, bribed officials to get permits and clearances for new stores — and falsified records of these transactions. The NYT documets shown more than $24 million in bribes. Although, it must be emphasized that there are are not official findings as yet. Certainly an important goal for Walmart’s board and current management is to improve the company’s compliance capability. According to Walmart’s Global Compliance Report (GCR), it is also likely that enhanced compliance personnel, processes and systems are part of a company effort to respond to problems uncovered in the investigation to improve

The Act was criticized for being made appropriate to all foreign issuers listed on a U.S. exchange, even though several of the behavior the Act targeted was either a non-issue in foreign countries or was already efficiently regulated. According to Fraser, I. (Oct., 2002) this broad extraterritorial scope is particularly problematic given that the SEC has encouraged foreign issuers to enter U.S. capital markets by providing several accommodations to foreign practices and polices not inconsistent with the protection of U.S. investors. Foreign companies dispute that, as of the end of 2001, more than 1,300 foreign issuers had entered U.S. capital markets and became reporting companies in reliance on the SEC's accommodations.

Boyle, D., Boyle, J and Carpenter (2014) research titled “The SEC’s Renewed Focus on Accounting Fraud” about the SEC initiative on accounting fraud detection and misleading disclosure by implementing the Accounting Quality Model (AQM) using the Extensible Business Reporting Language (XBRL) (p.68). Boyle et al. mentioned Craig M Lewis, director and chief economist of the SECs Division of Economic and Risk Analysis, described AQM as a highly technical robust tool on detecting fraud and other accounting anomalies, while others called it “Robocop” as the use of XBRL tags is capable of computerized analysis and enhanced access to financial data by the stakeholders, the public and the SEC staff (pp.68-69). Boyle et al. cited that Robocop is a computerized system which takes the firm’s same day financial filings, processed it and keeps it in the database and enable open access of the financial data within 24 hours after being posted on the Electronic Data-Gathering, Analysis, and Retrieval (EDGAR) System. Boyle et al. summarized that accounting fraud and improper disclosures are evident in SEC’s renewed focus on its resources through the technology-based tool AQM as key component, while the SEC Financial Reporting and Audit Task Force initiatives focus on exploring and identifying areas vulnerable to fraudulent activities by increased emphasis on financial reporting fraud detection and disclosure irregularities (p.69). Boyle et al. mentioned David Woodcock, chair of the SEC Task