b.SOX Section 404Sarbanes-Oxley also strengthened a company’s required disclosures concerning the state ofits internal control over financial reporting. Under Section 404, issuers are required to present intheir annual reports management’s conclusion regarding the effectiveness of the company’sinternal controls over financial reporting. This statement must also assess the effectiveness ofsuch internal controls and procedures. In addition, the company’s independent auditor must attestto and report on its assessment of the effectiveness of the company’s internal controls overfinancial reporting.c.SOX Section 802
Section 802 of Sarbanes-Oxley prohibits altering, destroying, mutilating, concealing, orfalsifying records, documents, or tangible objects with the intent to obstruct, impede, orinfluence a potential or actual federal investigation. This section also prohibits any accountantfrom knowingly and willfully violating the requirement that all audit or review papers bemaintained for a period of five years41. Who is covered by the FCPA accounting provisions?The FCPA’s accounting provisions apply to every issuer that has a class of securitiesregistered pursuant to Section 12 of the Exchange Act or that is required to file annual or otherperiodic reports pursuant to Section 15(d) of the Exchange Act. These provisions apply to anyissuer whose securities trade on a national securities exchange in the United States, includingforeign issuers with exchange traded American Depository Receipts. They also apply tocompanies whose stock trades in the over-the-counter market in the United States and which fileperiodic reports with the Commission, such as annual and quarterly reports.42. Can a) companies and b) individuals have criminal liability for failing to comply with theFCPA's accounting provisions? Explain.Criminal liability can be imposed on companies and individuals for knowingly failing tocomply with the FCPA’s books and records or internal controls provisions. As with the FCPA’santi-bribery provisions, individuals are only subject to the FCPA’s criminal penalties forviolations of the accounting provisions if they acted “willfully.”For example, a French company was criminally charged with failure to implement internalcontrols and failure to keep accurate books and records, among other violations. As part of itsdeferred prosecution agreement, the company admitted to numerous internal control failures,including failure to implement sufficient anti-bribery compliance policies, maintain a sufficientsystem for the selection and approval of consultants, and conduct appropriate audits of paymentsto purported “business consultants.”Likewise, a German company pleaded guilty to internalcontrols and books and records violations where, from 2001 through 2007, it made paymentstotaling approximately $1.36 billion through various mechanisms, including $805.5 million asbribes and $554.5 million for unknown purposes.