February 23, 2005
The Foreign Corrupt Practices Act FCPA was passed in 1977. The Act required the registrant to maintain an adequate system of internal controls to prevent errors/irregularities in financial reporting. The Act has been frequently cited in numerous AAERs which have dealt with financial reporting.
I do realize that the auditing profession could have, until the SOA, elected to enhance their efforts in substantive testing in lieu of testing controls. However, in my opinion, this did not relieve the registrants from the obligation required by FCPA.
Hundreds of weaknesses in internal controls have been reported by registrants, and more appear forthcoming. My basic question is what happened to the enforcement effort of the FCPA by the Commission over the last almost three decades to allow todays need for so many weaknesses to have to be disclosed?
I assume the weaknesses were not created in the recent past, but have been in existence for some time. Also, how many of these weaknesses that are being disclosed today were in fact communicated by the auditor to the registrant in the past? I would think not that many, and, if so, that begs the question as whether the auditing profession was doing its job.
Thanks for reading. Sincerely, Robert Rouse