Internal Control and the Foreign Corrupt Practices Act

The Foreign Corrupt Practices Act (1977) has had broad implications for the internal control and reporting procedures of all firms reporting to the Securities and Exchange Commission (SEC). The two key issues facing these corporations involve: 1. executives' responsibilities under the law, and 2. adequate responses to the Act. The 4 most common corporate responses are: 1. a comprehensive review of internal controls, 2. documentation of the present internal controls of the company, 3. discussion only, and 4. strengthening the internal control environment without specific internal control measures. Many financial officers are resigned to control risk. They believe that no amount of internal control will provide complete insurance. Some believe that government does not understand the nature, limitations, and possibilities of internal control. Firms generally lack sufficient and accurate information about the control practices of other firms which would enable them to make better decisions about what practices are truly the best.