Dealing with the Foreign Corrupt Practice Act and the "Tone at the Top"

by Hiller Hardie 29. August 2012 10:45
The SEC and DOJ have been very active in investigating and prosecuting Foreign Corrupt Practices Act (“FCPA”) related matters of late. Pfizer, Teva Pharmaceuticals, Las Vegas Sands   and Avon are some of the more well known companies that have recently received negative press related to this. While the FCPA has been on the books since the late 1970’s, the fact that this bolus of activity is transpiring serves to remind us that (1) the temptation to use questionable practices to secure business overseas is omnipresent and (2) we as CPA’s, in both public practice and private industry, must play pivotal roles in combating questionable practices. The first line of defense against FCPA issues (or any questionable or fraudulent activity, for that matter) is to establish and maintain a strong system of internal accounting controls. CPA’s in management or internal audit roles can and should provide valuable advice and assistance in that regard. CPA’s in public practice need to diligently fulfill their duty to evaluate internal controls during their audits and communicated potential improvements. Indeed a critical, periodic review of existing controls, by both Management and the auditor can result in meaningful improvements and bolstering defenses. However, FCPA compliance issues often arise where collusion and/or management override are in play. In these situations, the critical importance of Entity Level Controls and the “tone at the top” becomes very apparent. While these may be viewed as “soft” and hard to grasp, especially by less experienced CPA’s, those who have been involved with sensitive issues (such as FCPA non-compliance) know their importance. The CPA must use his or her softer skills in assessing the “tone at the top”.  Often it is a pure “gut” feel that generates questions and ultimately may result in discovery of issues. The recent frequency with which FCPA issues have been noted requires us all to maintain (or elevate) our sense of professional skepticism.
Categories: Assurance