By looking at Oxley section 301.4, the audit committee requires to establish procedures for the receipt and treatment of complaints regarding accounting, internal accounting controls, or auditing matters. In addition, the audit committee requires to establish procedures to ensure the confidentially for the issuer and anonymously situation.
According to Harvard Law School’s article, approximately two-thirds of companies in the U.S. are affected by fraud. However, whistleblower Hotline can be as defense against management overrides. The article noted that whistleblower could be more effective if it become as apart of the corporate compliance programs and a reward of any monetary sanctions collected to motivate the employees Also, the article mention that the employees
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By looking at Oxley section 406, code of ethics is defining as honest and ethical conduct, including conflicts between personal interest and professional relationships and required by the issuer to disclosure the reports in full, fair, accurate, timely, and understandable way. Also, follow the applicable governmental rules and regulations. In addition, SEC requires that each issuer require disclosing whether he applied a code of ethics. If not, the reason must be disclosed. Furthermore, SEC needs to revise its regulations related to matters requiring prompt disclosure on a Form 8-K regarding any change in or waiver of the code of ethics for senior financial officers. In March 2003, the SEC issues its final rule. The Company requires disclosing whether it has "audit committee financial expert", and whether it is independent of management. If not, the company must disclose that and explain why. Furthermore, The Company requires disclosing whether it has adopted a code of ethics that applies to the company's principal executive officer, principal financial officer, principal accounting officer
Company X is committed to providing education for each employee to report unethical behavior and resolve conflicts without fear of retaliation. One such example would be the need to report employee theft. Employee theft is not only unethical but could also be criminal in nature. Regardless of employee status (entry level or upper management), each employee should feel it their responsibility to report any unethical behavior they observe. Employee theft can range from theft of money, time, office supplies or merchandise to providing proprietary information to unauthorized entities. These activities can result in a negative public image of Company X and should be reported as quickly as possible. Prior to reporting such offenses, each employee should ensure the accuracy of the evidence they will be reporting. There are various methods to report such abuses including but not limited to an anonymous toll free hot line number, verbal or electronic reporting to the local Human Resources office and the open door policy which encourages employees to approach members of management without the fear of
Public companies issuing securities, public accounting firms, and firms providing auditing services whether they are domestic or foreign must comply with Sarbanes-Oxley. (Sarbanes-Oxley Act Section 404, 2002) Additionally, publicly traded companies with a market capitalization greater than $75 million must comply with these new rules. (Don E. Garner, 2008) A company’s management is required to provide an external auditor with all financial statements for the current review period. Upon reviewing these statements the auditor issues a report classified as unqualified, unqualified with explanation, qualified, adverse, or disclaimer based on what they find or do not find. All public companies reports are available on the Securities Exchange Committees website, below is a sample of what this report looks like. You can imagine what a relief this was for investors, to be able to search any company and find statements solidifying their prospective investment.
Sarbanes-Oxley Act contains 11 titles, which provide the specific guidelines and regulations for financial reporting. The titles are: Public Company Accounting Oversight Board (PCAOB), Auditor Independence, Corporate Responsibility, Enhanced Financial Disclosures, Analyst Conflict of Interest, Commission Resources and Authority, Studies and Reports, Corporate and Criminal Fraud Accountability, White Collar Crime Penalty Enhancement, Corporate Tax Returns and Corporate Fraud Accountability. The introduction of the act states that it is an act “to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes”. (Sarbanes-Oxley Act, 2002)
While reporting fraud on the government can be personally rewarding from a moral, ethical and financial standpoint, it can also be very difficult in terms of the stress and anxiety associated with standing up to powerful corporate interests. The decision to become a whistleblower can be a life-altering experience that was about to overtake General Motors. This could potentially have an adverse effect on the whistleblower’s employment, social activities, and other aspects of his or her life (McEldrew Young, 2016).
To be careful “independent” under SOX rule, an audit committee member may not agree any consulting, review or other compensatory costs from the issuer or be an “associated person” of the issuer or a supplementary. requires companies to release whether they have a financial expert. Having someone with financial knowledge puts the audit committee in a stronger position to examination and task the company’s financial statements, decide that
In this paper, I will cover the characteristics of a whistleblower provide an example of one and cover how the Sarbanes-Oxley Act would be used in this particular event.
In an age when accelerated communications contribute to growing perceptions of organizational improprieties, the ethical and legal implications of whistleblowing have become a major topic of discussion. According to Lawrence and Weber (2014), whistleblowing is an employee disclosing apparent organizational misconduct to the government or media; however, this reporting of information should come after attempts at going through proper channels in order to persuade the organization to take appropriate actions has been ineffective.
2. What measures can and should be taken to make it easier for corporate employees to ‘‘blow the whistle’’ on a fraudulent scheme they uncovered within the firm?
After online research, key characteristics for the operation of an effective corporate whistleblower hotline identified include:
If the CEO received a report of his misconduct, the business would surely fall as the boss was the key person who kept the business running steadily. Most often, this event can cause massive damage to employee’s salaries, and affect the economic values as well. Furthermore, one may argue that whistleblowing may violate individual rights as employee’s signed a contract abiding by company’s standard. In an article called “Whistleblowing and Professional Responsibilities” by Sissela Bok, she emphasizes “employees have a loyalty oath of confidentiality and secrecy” (Bok 178) which may violate human rights as well. Individuals often view that they often have the right to privacy. However, whistleblowing to the company can create a breach in loyalty. Similar to a friend posting every secret about the person, employers contain information to avoid mass media and future damages to the community. Therefore, whistleblowing may create further chaos and future problems. While whistleblowing has its flaws regarding the standards placed on the employee, moral and ethical rights are higher than what an employer can offer for their
The CEO and all senior financial officers also have an additional code of ethics. They are responsible for full, accurate, and timely disclosure in reports required to be filed by the SEC. Each member is also required to report any material untrue fact that comes to their attention or any deficiency in the design/operation of internal controls. Each member must report any violation of their code of ethics or any violation of other laws, rules, or regulations (Walmart 9). This additional codes of ethics is important because it holds all of the executives accountable for their actions. This should aid in preventing fraudulent reporting by management because this code can be cited when looking at disciplinary action.
Whistleblowing implies the imperative necessity to alert others (company) about immorality issues, including illegal activity, happening inside the organization. For the employee who decides to blow the whistle “usually brings to he/she undesirable consequences.” Some consequences are like threats, loss of employment, and social rejection. (Chiu,R. 2003)
For example, The Audit Committee of The Board of Directors has established procedures to receive, retain and treat complaints regarding fiscal improprieties, accounting, internal accounting controls or auditing matters and to provide for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters. Employees may submit good faith complaints regarding accounting or auditing matters without fear of dismissal or retaliation of any kind (Johnson & Johnson Investor Relations, 2006). All employees are responsible for
Whistle-blowing is an independent way of letting the Anglo American stakeholders know the unethical or deleterious business practices. The unethical and deleterious business practices can be come up with the bribery, unsafe chemical usage, improper safety measure, no emergency exit, unhygienic work place, making the material misstatement in the financial report, lowering the profit, tax evasion, serious damage to the environment, threat for the ecology and other species etc. The record proportion of complaints was received in 2009 relating to the human resources that could be useful indicator to solve future big issues, though the complaints were not revealed. None of the complaints was a big issue for the Anglo American. Immediate action was taken to solve the issues appropriately.
To help individuals report, it is suggested the management should start a whistle blowing hotline. Such a hotline can be a critical component of the company’s anti corruption efforts as tips can be a common way of detecting frauds.