Corporate Compliance Report
Companies that are being established as well as companies struggling with compliance issues need some method of dealing with governance. The method of handling corporate governance and compliance issues is to implement an enterprise risk management system (ERM). The system should examine alternatives and incorporate the suitable processes that fit into the company's structure. Developing internal control and corporate governance procedures is the foundation for such a system. Developing these procedures include identifying and putting into practice compliance steps and processes. The company will need to implement preventative internal controls that incorporate risk mitigation. This segment of the process includes utilizing systems and benchmarking organizations for compliance techniques. Lastly, the company will need to determine which techniques to put into practice in its compliance attempt. The company will begin to implement its enterprise risk management system by developing an appropriate internal control and corporate governance system.
Developing Internal Control and Corporate Governance System
Establishing internal control and corporate governance system helps ensure corporate compliance. Significant strategic planning is needed when developing a functional internal control and corporate governance system. This strategic planning includes developing preventive, detective, and corrective controls to cover the aspects of the corporate compliance.
The first step or control procedure a company should undertake when developing a governance system is developing preventive controls to avert a possible compliance violation. Preventive controls include developing guidelines and responsibilities to conduct reviews of ethics policies, conflict-of-interest procedures, and updates in corporate compliance procedures that will protect and position the company to prevent a possible compliance violation. An associate of the company's preventative control measures include comparing the organization's current conflict-of-interest policy with industry regulations on a regular basis, reviewing recent government filings, and evaluating the company's current compliance program. If these control steps are proactively taken regularly in the organization, the company will have taken preventative steps to avoid a potential future compliance violation (Maltz, Nov/Dec 2003).
The second step or control procedure a company should take to promote corporate compliance is a detective control. Detective controls will enable the company to detect if a possible compliance violation occurred or is at-risk for a violation occurring. The company will assign an associate or group of associates the responsibilities of taking detective control measures in regard to compliance regulations. Detective control responsibilities include reporting promptly and addressing objectively any compliance violations, making sure a prescribed observation program is in place to make certain the organization adheres to its code of ethics and compliance regulations, and formally reviewing and aligning company compliances with government regulatory compliances.
The specific obligations in this case would include monitor corporate governance activities and compliance with organization policies, and assess audit committee effectiveness and compliance with regulations
Implementing strategies to create an effective internal control environment is needed to prevent and detect controls of fraud (Murphy, 2015). Control is needed to combat fraud, enforcing employees and volunteers to do the right thing. Management must have control of the organizations operations to tackle risks when they arise (Arshad et al, 2015). According to Arshad et al (2015):
Even though internal controls do not always work, every entity that has workers should have internal controls. Internal controls protect entities from dishonest workers. Internal controls are a series of checks and balances. The Sarbanes-Oxley Act of 2002 was needed to gain control of accounting improprieties. Dishonest accounting has cost company employees millions of dollars in retirement funds. It has also cost investors millions of dollars.
Although Hollate introduced a compliance program and code of conduct when it went public, the programs were put on “the back burner”. This outcome is not surprised for that the company does not pay attention to the programs. It is, therefore, important to “reinforce the values” and “employee a boundary system when actions are inconsistent with the code of conduct” for the purpose of early detection. Tyco provides a good example after its scandal, by initiating “mandatory annual compliance training for all its employees worldwide” and creating the Tyco Guide to Ethical Conduct to familiarize employees with company expectations and help them make ethical decisions. As tips is the most useful method for internal and external sources to detect frauds, the whistleblower hotline should be well communicated with encouragement on reporting any suspicious activity. In addition, to improve the effectiveness of the compliance program and code of conducts, Hollate should implement management monitoring and evaluation on a regular
Internal controls are a big factor in a company’s growth and value. Proper accounting practices are a big part of this process. Following the scandal caused by the unethical practices used by companies such as Enron, Tyco, Global Crossing and Worldcom, the Sarbanes-Oxley Act of 2002 was enacted. This act held companies accountable for their actions. Companies could either face fines, imprisonment or both if the act was not followed. Also, if there are deficiencies in a company’s internal control, stock prices can plummet. There are many physical, mechanical and electronic controls involved in internal controls. Some of these are good controls while others, even though helpful, are not as effective as others.
Internal controls are increasingly a crucial part of any business large or small. Controls serve two purposes according to financial accounting chapter eight; they safeguard assets and enhance the accuracy and reliability of accounting records. Expanding on that concept internal controls are put in place as a result of activities that have occurred in the past and are an effort to protect internal and external users. Internal controls safeguard company assets by outlining fair and efficient regulations in an effort to prevent theft. Regulations designed to establish responsibility, segregation of duties, and accountability protect investors, management, and the public. The result of a financial outrage and catastrophes of WorldCom, Enron, Tyco, Hollinger, and Tyco necessitated the need for better regulation and control leading to the creation of the Sarbanes Oxley Act (SOX).
Internal controls provide foundation for successful and safe organization. Information listed in this brief will provide management some insight into the internal controls and some risk organization should be aware off.
Being compliant is necessary for any organization. Within the health care industry, corporate compliance, ethics, fraud and abuse is a priority. Health care organizations must be vigilant in abiding by the ethical policies. By establishing ethical and compliance policies and procedures, this will undoubtedly present the commitment and the responsibility that the health care organization has for financial practices. Any health care organization that wishes to remain operational must abide by the rules that have been established by the organization themselves as well as state
According to this theory, self-regulation is seen as optimal and only should be replaced or supplemented by additional layers of formal controls when there is evidence of firm failures. The response regulation approach taken by the commission is that they feel that the corporation self-regulation would be accomplished through ethical programs. The ideal result that the commission is looking for a corporation to encourage ethical and discourage unethical behavior.
The purpose of the CMP is to solidify their organizational culture of integrity, ensuring that every person acts honestly and ethically in conducting everyday activities and making decisions. The CMP has three areas of focus: “The Compliance Management System, prevention of unlawful activities, and response to changes in regulations” (People 30). Throughout all departments are compliance teams that specialize in protecting the reputation of the company as well as individuals in the company through a process of “prevention, monitoring, and post-management” (People 30). Figure 1, below, is a graphic from the 2015 Samsung Electronics Sustainability Report, which illustrates how compliance management is incorporated throughout the organization (People
At first, the organization has already set up a compliance plan, and it is committed to ensuring that it will comply with the entire set standards. To illustrate, it works effectively to recognize and predict any corporate integrity agreement risk in the organization. On the other hand, the company is committed to providing training to the employees on various issues (Vaidya, 2013). Also, there is a copy of corporate integrity agreement and policies related to it in each department, and there is a certified trainer does a round to explain any thing that is not understood in the agreement monthly.
The last action is employee training. This would require written policies and procedures to be reviewed on a regular basis through education practices such as instructor lead training, web-based training, routine communication and access to all the material via the company’s website. As new employees get hired, orientation should cover all Code of Ethics material and provide an opportunity for question and answers. Throughout the year, any amendments or changes should be communicated via e-mail flash updates, publication in general areas, departmental updates, and updates to the website. Web-based training should be an annual requirement where each employee is required to sign-on and review through the Code of Ethics. The web training would
This report gives the brief overview of the concept of corporate governance, its evolution and its significance in the corporate sector. The report highlights various key issues and concerns that are faced by the organizations while effectively implementing and promoting Corporate Governance.
Control and system design to ensure that the activities and processes of the organization are conducted in accordance with the corporate rules and objectives
Overall, the company is having ineffective controls regarding different departments and in the whole organization. An effective internal audit department should be established within the organization which should test the effectiveness of these controls on regular basis and make it sure that all controls are working effectively and efficiently with the different departments of the organization. Also the Internal auditor should implement the most effective processes and measures to prevent and detect the fraud, corruption and non compliance with the laws and regulations in the organization. Establishment of internal audit committee would be helpful in this regard which comprises of executive and non executive directors.