. Do you think that the penalty for violation of the internal control provision
ID: 398597 • Letter: #
Question
. Do you think that the penalty for violation of the internal control provision and the books and records provision of the FCPA is stiff enough to motivate companies to implement sys- tems capable of detecting bribes? Is it possible that some organizations tolerate lax internal control so managers have as much freedom as possible in running their business? What changes, if any, would you suggest to the FCPA? 2. When an organization implements a major accounting software package, it also inherits the system of internal control that is built into the software—good, bad, or indifferent. What can be done if it is discovered, months after the software has been purchased and installed, that the software is lacking in good internal control? 3. IT workers have a key role in designing and implementing the internal controls associated with systems that automate the processing of business transactions, such as the payment of suppliers, employees, and business partners and the receipt of payments from custo- mers. What can IT workers do to prepare themselves for this responsibility? Who should the IT workers collaborate with when evaluating or designing the automated internal con- trols of a computer-based information system?
Explanation / Answer
1.The Foreign Corrupt Practices Act(FCPA) aims to prohibit bribery of foreign officers and mandates the public companies in the US to keep accurate books, records and internal accounting controls. The individuals or the companies that violate the FCPA shall be subject to severe penalties-both criminal and civil.
The FCPA can be broadly classified into –accounting provisions and anti-bribery provisions.In case of criminal violations of accounting provisions,the US companies can be charged a fine of upto $25 millions for every instance of violation and an individual can be charged upto $5 million per instance and can also be sentenced to twenty years in prison.Thus the penalty for violation is very severe and hence can help in motivating companies in implementing an anti-bribery control systems in their business operations.
However,there are organizations that tolerate lax internal control so as to provide maximum freedom to their managers for smooth running of their businesses.The number of these kind of organizations is small and these type of organizations are generally big players in the market(in terms of revenues and profits).
2.Since the organization has already invested in the accounting software,it does not make financial sense to switch to a new vendor to meet the IT requirements.So,an organization can retain all the good features and customize the bad and the indifferent features of the software by interacting with the software providers.
If they do not provide an option for customization of the software,then it is better to switch to a new supplier that address the requirements of the organization.
3.IT workers play an important in the design and implementation of software that automates various business transactions .The IT employees need to understand the accounting principles and the provisions and the various legal aspects governing the business transactions such as the FCPA.
They should enhance their knowlegde about the accounting provisions and the anti-bribery provisions and ensure that the data is safe and secure in the software systems .The confidentiality of data should be of utmost importance to these employees so as to prevent fraud and data breach.
The IT workers should closely collaborate with business functions such as the Finance and Marketing.If there is a provision,it makes sense to collaborate with the suppliers,partners and customers of their organization to better understand their needs and tailor the software accordingly.
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