Federal Sentencing Guildelines for Organizations

2 February 2017

The U. S Federal Sentencing Guidelines for Organization instituted in 1991, and now the Sarbane-Oxley Act 2002 are aim to protect shareholders and other stakeholders from corporation misconduct. One of their goals is to require employees to report observed misconduct.In 2002, after accounting fraud at Enron and WorldCom, Congress passed the Sarbanes-Oxley to establish a system of federal oversight of corporate accounting practices in response to corporate accounting scandals, and restore stakeholders’ confidence. The Sarbanes-Oxley Act requires that corporations take “greater responsibility for their decisions and to provide leadership based on ethical principles”. For instance, the Sarbanes-Oxley Act makes the CEOs and CFOs personally liable for the credibility and accuracy of their companies’ financial statements.

The Sarbane-Oxley Act has very specific sections regard to ethics and compliance for public companies. For examples, the section 301 requires that “the audit committee to establish procedures for the receipt, retention, and treatment of complaints, including confidential and anonymous submissions by employees received by the issuer regarding accounting, internal accounting controls, or auditing matters”.And the Section 406 requires that “companies to institutes a code of ethics for senior financial officers, and provides minimum requirements for the code”. It forces organizations a set of values that must make up a portion of the company’s culture, which meant to provide insight into the character of an organization, the ethics and level of openness. Also, section 806 requires certain “whistleblower protections” for individuals who provide information or assist in investigations that related to suspected unlawful behavior within the company.The Sarbane-Oxley Act intends to “motivate employees through whistle-blower protection that would prohibit the employer form taking certain actions against employees who lawfully disclose private employer information to, among others, parties in judicial proceeding involving a fraud claim”. The Public Company Accounting Oversight Board, which is the heart of the Sarbane-Oxley Act, monitors accounting firms that audit public corporations and establishes standards and rules for auditors in accounting firms.

Federal Sentencing Guildelines for Organizations Essay Example

Its duties are: (1) registration of public accounting firm; (2) establishment of auditing, quality control, ethics, independence, and other standards relating to preparation of audit reports; (3) inspection of accounting firms; (4) investigations, disciplinary proceedings, and imposition of sanctions; and (5) enforcement of compliance with accounting rules of the board, professional standards, and securities laws relating to the preparation and issuance of audit reports and obligations and liabilities of accountants.Federal Sentencing Guidelines for Organization was passed by Congress in 1991 to create “an incentive for organizations to develop and implement programs designed to foster ethical and legal compliance”. The Guidelines imposes harsh penalties upon organizations whose employees or other agents have committed federal crimes. FSGO applies to almost all types of organizations, such as corporations, partnerships, unions, non-for-profit organizations and trusts.One significant aspect of the FSGO is that “each organization is responsible for the wrongful acts of its employees as long as the employees were acting in their official capacity”. FSGO works as an incentive, if an employee commits a crime it may be subject to reduce organizational penalties that “demonstrated due diligence in developing effective compliance programs that discourage unethical and illegal conduct”.The Guidelines articulate the minimum steps that the organization must take to establish that it exercised due diligence: (1) A firm must develop and disseminate a code of conduct that communicates required standards and identifies key risk areas for the organization; (2) High-ranking personnel in the organization who are known to abide by the legal and ethical standards of the industry (such as an ethics officer, vice president of human resources, general counsel, and so forth) must have oversight over the program; (3) No one with a known propensity to engage in misconduct should be put in a position of authority; (4) A communications system for disseminating standards and procedure (ethics training) must also be put into place; (5) Organizational communications should include a way for employees to report misconduct without fearing retaliation, such as an anonymous toll-free hotline or an ombudsman.

Monitoring and auditing systems designed to detect misconduct are also required. (6) If misconduct is detected, then the firm must take appropriate and fair disciplinary action. Individuals both directly and indirectly responsible for the offense should be disciplined. In addition, the sanctions should be appropriate for the offense. (7) After misconduct has been discovered, the organization must take steps to prevent similar offenses in the future. This usually involves making modifications to the ethical compliance program, additional employee training, and issuing communications about specific types of conduct.The Guidelines urge an organization to take responsibility for its actions as soon as it detects an offense.

The organization must disclose wrongdoing to government authorities and its cooperation must be both timely and thorough. The Guidelines require that the organization must begin cooperating at the time it receives notice of an investigation and the organization must disclose all pertinent information sufficient for law enforcement officials to identify the nature and extent of the offenses and the responsible individuals. An effective ethics and compliance program will foster and encourage ethical conduct by employees in all aspects of the corporation’s business.The Guidelines for Organizations requires “high-level personnel to take steps to measure the effectiveness of their programs”. Specifically, require the businesses that “ensure that the organization has an effective compliance and ethics program” and “evaluate periodically the effectiveness compliance and ethics program”, also “periodically assess the risk of criminal conduct and take appropriate steps to design, implement, or modify each requirement to reduce the risk of criminal conduct identified through this process”.

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