Page 48 - U.S. FOREIGN CORRUPT PRACTICES ACT

A Resource Guide to the U.S. Foreign Corrupt Practices Act. Second Edition.

devise and maintain a system of internal accounting
controls sufficient to provide reasonable assurances
Bribes Have Been Mischaracterized As:
that—
• Commissions or Royalties
• Consulting Fees • (i) transactions are executed in accordance
with management’s general or specific
• Sales and Marketing Expenses authorization;
• Scientific Incentives or Studies • (ii) transactions are recorded as necessary
• Travel and Entertainment Expenses (I) to permit preparation of financial
• Rebates or Discounts statements in conformity with generally
accepted accounting principles or any other
• After Sales Service Fees criteria applicable to such statements, and (II)
• Miscellaneous Expenses to maintain accountability for assets;
• Petty Cash Withdrawals • (iii) access to assets is permitted only in
• Free Goods accordance with management’s general or
specific authorization; and
• Intercompany Accounts
• (iv) the recorded accountability for assets
• Supplier / Vendor Payments is compared with the existing assets at
• Write-offs reasonable intervals and appropriate action is
• “Customs Intervention” Payments taken with respect to any differences …. 231
Like the “reasonable detail” requirement in

the books and records provision, the Act defines
Internal Accounting Controls Provision “reasonable assurances” as “such level of detail
The payment of bribes often occurs in and degree of assurance as would satisfy prudent

companies that have weak internal accounting officials in the conduct of their own affairs.” 232
control environments. Internal controls over The Act does not specify a particular set of
financial reporting are the processes used by controls that companies are required to implement.
companies to provide reasonable assurances Rather, the internal accounting controls provision
regarding the reliability of financial reporting and gives companies the flexibility to develop and
the preparation of financial statements. They maintain a system of controls that is appropriate to

include various components, such as: a control their particular needs and circumstances.
environment that covers the tone set by the Although a company’s internal accounting
organization regarding integrity and ethics; risk controls are not synonymous with a company’s
assessments; control activities that cover policies and compliance program, an effective compliance
procedures designed to ensure that management program contains a number of components that

directives are carried out (e.g., approvals, may overlap with a critical component of an issuer’s
authorizations, reconciliations, and segregation internal accounting controls. Fundamentally, the
of duties); information and communication; and design of a company’s internal controls must take
monitoring. Section 13(b)(2)(B) of the Exchange Act into account the operational realities and risks
(15 U.S.C. § 78m(b)(2)(B)), commonly called the attendant to the company’s business, such as: the
“internal controls” provision, requires issuers to: nature of its products or services; how the products

or services get to market; the nature of its work

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