Armor Holdings Inc.

The U.S. Foreign Corrupt Practices Act (FCPA) has gained significant popularity in recent years across borders due to the increased investigation and penalties under the law. The following case is a real-life case that highlights the main provisions of the FCPA. Using cases in teaching an auditing or ethics course is much needed to develop students’ professional judgment, critical and analytical thinking skills and communication skills. Presently, there are a few cases that address the Foreign Corrupt Practices Act and its effect on financial reporting and auditor responsibilities about illegal acts. The Armor Holdings case is interesting and information is publicly available regarding the circumstances that describe the bribery act, lack of whistle-blower protection, the tone at the top, and the accounting treatment. In addition, the increase in actions brought by the Securities and Exchange Commission (SEC) under the FCPA since 2010 heightens the relevance of this case and underscores the need for students to learn the skills necessary to ensure compliance with FCPA and related key regulations such as the Sarbanes Oxley and the Dodd Frank Act. Therefore, cases like this one provide a rich tool to navigate topics and enforce students’ learning of client’s illegal actions and their consequences. These skills are invaluable in practice.

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Koss Corporation Case: Trouble in Brew City

Issues in Accounting Education ◽

10.2308/iace-50004 ◽

2011 ◽

Vol 26 (3) ◽

pp. 547-568 ◽

Cited By ~ 3

Author(s):

Brian Daugherty ◽

Daniel G. Neely

Keyword(s):

Financial Reporting ◽

Internal Control ◽

Real Life ◽

Chief Executive ◽

Securities And Exchange Commission ◽

Financial Statement Fraud ◽

President Obama ◽

Public Companies ◽

Chief Operating Officer ◽

Sarbanes Oxley

ABSTRACT This instructional case provides auditing students an opportunity to examine an interesting real-life embezzlement and financial statement fraud occurring at a publicly traded company in the post-Sarbanes-Oxley (SOX) era. The case focuses on independent auditors' and senior management's reporting responsibilities related to internal control over financial reporting involving smaller public companies (nonaccelerated filers). While all public companies are subject to external auditor and management attestation on the effectiveness of internal control over financial reporting following SOX, the Securities and Exchange Commission (SEC) granted nonaccelerated filers numerous extensions for the effective date of required auditor attestation. In 2010, President Obama signed legislation to permanently exempt nonaccelerated filers from auditor attestation. The case also highlights inherent risk assessments by the independent auditor when one individual holds multiple C-level titles (Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, etc.) within the organization concurrent with membership on the board of directors, and requires students to recommend internal control policies and procedures designed to prevent or detect the embezzlement.

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COSO 2013: Aligning Internal Controls and Principles

Issues in Accounting Education ◽

10.2308/iace-51585 ◽

2016 ◽

Vol 32 (3) ◽

pp. 117-127 ◽

Cited By ~ 5

Author(s):

Denise Dickins ◽

Rebecca G. Fay

Keyword(s):

Critical Thinking ◽

Financial Reporting ◽

Internal Control ◽

Financial Statements ◽

Thinking Skills ◽

Securities And Exchange Commission ◽

Internal Controls ◽

Critical Thinking Skills ◽

Reading Assignment

ABSTRACT Strong systems of internal control over financial reporting (ICFR) are critical to the production of reliable financial statements. Securities and Exchange Commission (SEC) regulations require that companies design, maintain, and regularly evaluate their systems of ICFR, and Auditing Standard No. 5 requires that auditors evaluate companies' systems of ICFR. Therefore, it is necessary for accountants to be able to (1) describe and classify internal controls and (2) determine deficiencies in internal control. Recent reports suggest that accountants may lack sufficient training and guidance in these respects (e.g., Rapoport 2012). This activity provides an opportunity for students to practice these skills while learning more about the Committee of Sponsoring Organizations of the Treadway Commission's (COSO) 2013 Framework. Provided are a summary discussion of ICFR and the COSO 2013 Framework, an outside-of-class reading assignment, and an activity that requires students (independently or in groups, either in or outside of class) to employ critical-thinking skills to: (1) classify (i.e., map) a listing of controls as being aligned with one (or more) of the COSO 2013 Framework's five components and 17 principles that comprise a well-designed system of internal control, and (2) identify any deficiencies (gaps) in design due to missing or inadequate internal controls.

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An Assessment Of The Impact Of The Sarbanes-Oxley Act On The Investigating Violations Of The Foreign Corrupt Practices Act

Journal of Business & Economics Research (JBER) ◽

10.19030/jber.v6i10.2476 ◽

2011 ◽

Vol 6 (10) ◽

Author(s):

Karen T. Cascini ◽

Alan DelFavero

Keyword(s):

Financial Reporting ◽

Font Size ◽

Foreign Corrupt Practices Act ◽

Unethical Conduct ◽

Corporate Scandals ◽

Corporate Executives ◽

Sarbanes Oxley ◽

The Impact

During the late 1990s and early 2000s, a plethora of corporate scandals occurred. Due to these corporate debacles, corporate executives have been placed under fire. In response to such unethical conduct with regard to internal practices and financial reporting, legislation has been passed in order to ensure that corporations conduct their business in an ethical manner. The purpose of this paper is to assess the connection between the Foreign Corrupt Practices Act of 1977 (FCPA) and the Sarbanes-Oxley Act of 2002 (SOx), to determine whether SOx has influenced the FCPA’s investigative violation activities by examining the number of such investigations since the passage SOx. This paper also addresses specific cases of violations of anti-corruption laws and compares SOx and the FCPA on violation penalties.

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Recent Developments at the Securities and Exchange Commission: Academic Contributions and Opportunities

Accounting Horizons ◽

10.2308/acch.2007.21.3.313 ◽

2007 ◽

Vol 21 (3) ◽

pp. 313-323 ◽

Cited By ~ 7

Author(s):

Bjorn N. Jorgensen ◽

Cheryl L. Linthicum ◽

Andrew J. McLelland ◽

Mark H. Taylor ◽

Teri Lombardi Yohn

Keyword(s):

Financial Reporting ◽

Stock Options ◽

Academic Research ◽

Accounting Standards ◽

Standard Setting ◽

Securities And Exchange Commission ◽

Sarbanes Oxley ◽

Recent Developments ◽

Key Issues

In recent years, the Securities and Exchange Commission (SEC) has grown in size and scope. The implementation of Sarbanes-Oxley (SOX) and the globalization of accounting standards have increased the SEC's workload and brought forth important questions regarding the development and application of accounting and auditing standard setting and regulation. This paper identifies key issues of importance to the SEC including record levels of restatements, SOX implementation, the backdating of stock options, increased use of fair-values in financial reporting, adoption of IFRS by numerous non-U.S. registrants, and foreign deregistration. The article highlights the contribution of academic research as it relates to SEC speeches and rulemaking, drawing upon experience of 2005–2006 SEC academic fellows.

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Teaching Critical & Analytical Thinking in High School Biology?

The American Biology Teacher ◽

10.1525/abt.2012.74.3.9 ◽

2012 ◽

Vol 74 (3) ◽

pp. 178-181 ◽

Cited By ~ 5

Author(s):

Gaby McDonald

Keyword(s):

High School ◽

Critical Thinking ◽

Real Life ◽

Thinking Skills ◽

Critical Thinking Skills ◽

Experimental Results ◽

Data Sets ◽

High School Biology ◽

University Courses ◽

Analytical Thinking

How can critical and analytical thinking be improved so that they mimic real-life research and prepare students for university courses? The data sets obtained in students’ experiments were used to encourage students to evaluate results, experiments, and published information critically. Examples show that students can learn to compare and defend their experimental results, thus bringing them closer to real research and critical-thinking skills.

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Section 404 Compliance and Financial Reporting Quality

Accounting Horizons ◽

10.2308/acch.2010.24.3.441 ◽

2010 ◽

Vol 24 (3) ◽

pp. 441-454 ◽

Cited By ~ 41

Author(s):

Albert L. Nagy

Keyword(s):

Financial Reporting ◽

Internal Control ◽

Reporting Quality ◽

Financial Statements ◽

Securities And Exchange Commission ◽

Small Companies ◽

Section 404 ◽

Financial Reports ◽

Sarbanes Oxley

SYNOPSIS: This study examines whether the Sarbanes-Oxley Act Section 404 (S404) compliance efforts lead to higher quality financial reports. An objective of S404 is to encourage companies to devote adequate resources and attention to their internal control systems, which should lead to more reliable financial statements. A natural laboratory of S404 compliance and noncompliance companies exists because the Securities and Exchange Commission has deferred the S404 compliance date for small companies (nonaccelerated filers). A logistic regression model is estimated using a sample of companies surrounding the S404 compliance threshold to measure the S404 compliance effect on the likelihood of issuing materially misstated financial statements. The results show a significant and negative relation between S404 compliance and issuance of materially misstated financial statements, and suggest that the S404 regulation is meeting its objective of improving the quality of financial reports.

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TO THE PROBLEM OF THE METHODOLOGICAL INCORRECTNESS OF THE SUBSTANCE OVER FORM PRINCIPLE IN MODERN ACCOUNTING IN THE INTERNATIONAL BUSINESS CONTEXT

Financial and credit activity problems of theory and practice ◽

10.18371/fcaptp.v5i40.244917 ◽

2021 ◽

Vol 5 (40) ◽

pp. 145-155

Author(s):

A. Semenets ◽

O. Panfilov ◽

Ye. Kuzkin ◽

S. Kuznetsova ◽

I. Hladii

Keyword(s):

International Business ◽

Financial Reporting ◽

Real Life ◽

Financial Statements ◽

Jel Classification ◽

Theory And Practice ◽

Professional Judgment ◽

Economic Activities ◽

Normative Documents ◽

Advantages And Disadvantages

Abstract. The article analyzes the historical process and factors contributing to the formation and development of the substance over form principle in both domestic and global accounting practice, its impact on doing business in specific countries and in international business. The organization and maintenance of accounting is based on a set of accounting principles that should ensure that economic events are properly accounted for and, as a result, converted into financial statements, which serve as a source of information for management decisions by various users of financial and economic information, international entities among them. Among these principles we can name the one of the substance over form. The philosophical basis for defining and applying the substance over form principle has been studied. It is discovered that the definition of the substance over form principle combines dialectically incompatible concepts. Namely, a set of internal, stable and defining links reflecting the main features and development trends of objects and processes (in this case, accounting and financial reporting in business transactions) prevails over the mode of existence and expression of meaning, organization and structure of accounting and financial statements. Such a combination of dialectically incompatible categories may lead to different interpretations of the substance of accounting records and, as a result, of the content of the financial statements. Cases of applying and using the substance over the form principle both in normative documents and in real-life accounting are considered. The main advantages and disadvantages of the application of the substance over form principle in the theory and practice of accounting while performing financial and economic activities and doing international business are analyzed. The research has shown that the application of the substance over form principle increases subjectivity in accounting and is largely determined by the qualifications of the accountant doing professional judgment and their moral and ethical qualities. The main causes of conflict situations while applying the substance over form principle are identified and ways to overcome the existing contradictions arising in the process of reflecting economic events in accounting between their legal (documentary) design and economic content are suggested. Keywords: methodology, principle, substance, content, form, accounting, international business, international relations. JEL Classification B41, M41, F23, F50 Formulas: 0; fig.: 0; tabl.: 1; bibl.: 25.

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Some Observations on the Use of Structural and Remedial Measures in American and German Law After Sarbanes-Oxley

German Law Journal ◽

10.1017/s2071832200015807 ◽

2003 ◽

Vol 4 (2) ◽

pp. 127-135 ◽

Cited By ~ 2

Author(s):

David C. Donald

Keyword(s):

Financial Reporting ◽

Stock Prices ◽

Investment Decisions ◽

Securities And Exchange Commission ◽

Financial Information ◽

Securities Regulation ◽

Accurate Information ◽

Fraud Risk ◽

Sarbanes Oxley ◽

The U.S

Rational investment decisions require accurate information regarding the operations and performance of issuers. As the U.S. Securities and Exchange Commission (“SEC”) has recently noted: “Accurate and reliable financial reporting lies at the heart of our disclosure-based system for securities regulation, and is critical to the integrity of the U.S. securities markets. Investors need accurate and reliable financial information to make informed investment decisions. Investor confidence in the reliability of corporate financial information is fundamental to the liquidity and vibrancy of our markets.” Issuers have strong motives to signal to investors that the business information they disclose is correct and complete – so as to build solid reputations and avoid discounts that investors might apply to their stock prices as compensation for undisclosed risk or misrepresented results. A similar argument applies to “gatekeeping” reputational intermediaries, such as auditing firms and investment banks that lend their reputations to their clients in various ways. However, dishonest issuers and gatekeepers can take advantage of a generally honest market (that does not contain a substantial fraud risk discount), and the return on fraud for a given member of a firm might exceed such individual's pro rata share of the firm's overall reputational capital, making crime literally pay; therefore, regulation must be introduced to supplement market controls and mandate full and accurate disclosure.

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A Research-Based Perspective on the SEC’s Proposed Rule—Roadmap for the Potential Use of Financial Statements Prepared in Accordance with International Financial Reporting Standards (IFRS) by U.S. Issuers

Accounting Horizons ◽

10.2308/acch.2010.24.1.139 ◽

2010 ◽

Vol 24 (1) ◽

pp. 139-147 ◽

Cited By ~ 21

Author(s):

Karim Jamal ◽

Robert Bloomfield ◽

Theodore E. Christensen ◽

Robert H. Colson ◽

Stephen Moehrle ◽

...

Keyword(s):

Financial Reporting ◽

Structural Changes ◽

Accounting Standards ◽

Securities And Exchange Commission ◽

International Financial Reporting Standards ◽

Professional Judgment ◽

Reporting Standards ◽

Global Regulator ◽

Financial Reporting Standards ◽

Potential Use

SYNOPSIS: The Securities and Exchange Commission (hereafter, SEC) issued a call for comment on a proposal to adopt a roadmap for potential use of international financial reporting standards (hereafter, IFRS) by U.S. companies. We comment on five key issues raised by the SEC proposal. First, we propose that the need for a global regulator is overstated. A global regulator is unlikely to help achieve the stated goals of comparability and consistency of financial reporting on a global basis. We favor allowing U.S. companies to choose use of U.S. GAAP or IFRS rather than mandating one global monopoly set of standards. Second, we agree that the focus on auditing is a very relevant issue that deserves more attention from standard setters. Gains from adopting principles-based accounting standards such as IFRS are likely to be realized only if auditors are also principles-based. Third, while we have serious concerns about governance and financing mechanisms of the International Accounting Standards Board (hereafter, IASB), we recommend that all regulatory actions cannot be held to a standstill while structural changes are made to the IASB. Fourth, we are not in favor of requiring reconciliation schedules from U.S. companies using IFRS. We view such reconciliations as being costly and unnecessary. Fifth, we recommend that the SEC pay more explicit attention to the educational and professional judgment consequences of its proposals.

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Enriching AIS Courses With SOX Compliance Activities

AIS Educator Journal ◽

10.3194/1935-8156-5.1.1 ◽

2010 ◽

Vol 5 (1) ◽

pp. 1-24 ◽

Cited By ~ 2

Author(s):

Joann Segovia ◽

Carol M. Jessup ◽

Marsha Weber ◽

Sheri Erickson

Keyword(s):

Corporate Governance ◽

Financial Reporting ◽

Internal Controls ◽

Accounting Profession ◽

Investor Confidence ◽

Reporting Requirements ◽

Sarbanes Oxley ◽

Audit Firms ◽

Significant Change

A very significant change to the accounting profession occurred in 2002 when the Sarbanes-Oxley Act of 2002 (SOX) was enacted. This legislation had a significant impact on corporations and their audit firms. The objective was to improve corporate governance and its quality of financial reporting to improve investor confidence. This paper provides instructors with a background on SOX and suggests readings and activities that reflect the requirements of SOX as it relates to the AIS environment and the analysis of internal controls. These activities can strengthen students' understandings of how corporations respond to the various reporting requirements of this Act.

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