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Corporate Compliance Report

1730 words - 7 pages


Corporate Compliance Report

Corporate Compliance Report

With so many corporate scandals and misappropriation of finances, the United States government has developed many laws and action agencies to aid in reducing the amount of corporate mishandlings. Regulatory legislation mandating a report on internal controls is now a corporate obligation. Risk management is a fundamental area of importance to stakeholders. Organizations that are best practice companies look to the Committee of Sponsoring Organizations for guidance to develop efficient internal controls, enterprise risk and against fraudulent activities. This paper will outline a ...view middle of the document...

“The Enterprise Risk Management – Integrated Framework requires that organizations establish a risk appetite, measure actions, and decisions against that risk appetite and communicate results. Communication of enterprise risk management to users of financial information clearly enhances transparency” (COSO, 2006). The new COSO framework consists of eight components which are: internal control environment, objective setting, event identification, risk assessment, risk response, control activities, information and communication, and monitoring” (Sox-online, 2006). By understanding and employing these eight significant components, the stakeholders and management can design better internal controls for their organizations. Moreover, by instituting internal controls organizations are easily able to fulfill the directives of the Sarbanes-Oxley Act of 2002 (SOX). Section 404 of SOX distinctly relates to the efficacy of internal controls. Section 404 establishes responsibility on the corporate officers and board of directors on the accurateness of its financial documents as well as the assessment of internal controls. Additionally, Section 404 designates officers and the board responsible for processes for financial disclosures, liabilities, and the limitations of the internal controls. In For SOX compliance, corporations must provide documentation and evaluations demonstrating their financial reporting processes are precise, operating successfully, and are examined closely

According to COSO’s Chairman, John J. Flaherty, “this framework could not be completed at a more appropriate time… organizations worldwide now recognize the linkage between corporate governance, enterprise risk management and entity performance” (COSO, 2006). Western Assets (Western) is a top fixed income manager. Seeing that Western Assets is a part of the financial industry, they have to be cautious of insider trading, fraud, and theft. The penalties of these unlawful acts impact affect the company’s name, negatively affecting employees and customer confidence. Harsh consequences arise from state and federal organizations for illegal activities. For example, if the CFO and CEO of Western Assets decided to extend finances to each other without the knowledge and authorization of the board members, the SEC will inspect Western, and inflict severe fines. Western Asset, the company needs to establish internal controls and toughen up on corporate governance values. The following sections will briefly discuss recommendations for enterprise risk management based on COSO, which is composed of eight key components: internal control environment, objective setting, event identification, risk assessment, risk response, control activities, information and communication, and monitoring

Internal Control Environment

“COSO defines internal control as a process, affected by an entity’s board of directors, management, and other personnel. This process is designed...

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