Financial Accounting and Compliance Essay

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Financial Accounting Regulatory Compliance

The roles of the Board of Directors and Chief Executive Officer of a public company are invaluable in establishing an ethical environment that generates quality accounting and reliable financial reporting for shareholders and investors. In fact, their involvement in this important issue largely pertains to corporate structure and corporate governance. Understanding that structure requires cognizance of the fact that when a company is publicly traded, it is technically owned by the shareholders. Shareholders, of course, are the many different people who own public stock in a corporation. In that respect, everyone who works for the corporation actually works for the shareholders. The next level up in corporate governance is the employees who work for the corporation, and who are responsible for the daily operation of it. These are the people who are actually responsible for implementing the measures ordained by their superiors -- the Chief Executive Officer and the Board of Directors -- so that the company operates in an ethical manner which adheres to quality accounting and reliable financial reporting.

These employees are overseen by the Chief Executive Officer, who is tasked with ensuring these employees are operating in a financially ethical manner. The Chief Executive Officer in turn works for the Board of Directors, which is actually headed up by the Chairman of the Board. The Board has an integral role in disseminating policy for compliance to measures such as the Sarbanes-Oxley Act (Peregine, 2012) and other mandates of the SEC. These regulatory agencies create the laws that the Board must interpret and discern the best way possible to carry out in terms of ethics and quality, reliable accounting. The Board then sets the policy that ensures that the corporation is in adherence to the foregoing mandates. It is the primary job of the Chief Executive Officer to effect that policy and make sure that it is actually carried out by the various workers of that corporation. Thus, the Board is responsible for policy creation, and the CEO is tasked with actually implementing that policy

The main strategy for a CEO to implement that can lead to an ethical environment that results in high-quality accounting, reporting, and forecasting is to emphasize regulatory compliance. There are a number of different ways that a CEO can attempt to implement this strategy.

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He or she can attempt to ingrain regulatory compliance within his company culture by posting compliance objectives all throughout an organization. Moreover, he can stratify this process into different departments, so that all employees realize what they have to do to ensure compliance. For instance, there are different things that the information technology has to do for compliance than for those who are actually engaged in accounting and auditing for the company. Posting signage, and having managers emphasize the value of compliance, throughout the different departments is a critical way to emphasize this sort of ethical environment.

Additionally, a CEO can choose to publicize -- throughout the organization -- various facets of ethics as they relate to the different departments. There are myriad approaches for fulfilling this goal. The CEO can choose to post information about the various fines and penalties associated with non-compliance. He or she can also readily publicize actual use cases of companies that were either penalized for non-compliance, as well as those that were rewarded for compliance. Stories about whistleblowers and the personal rewards that they gain from regulatory agencies should also be widely circulated throughout the organization. In such a way ethics and compliance can become a widespread part of company culture.

It is difficult for corporate management to convincingly assure investors that performance forecast and expected earnings will be realized, for the simple fact that the stock market is so volatile. However, there are a number of things that corporate management can do to help reassure them that management is doing everything possible to maintain stock prices. Perhaps the most immediate way that corporate management can fulfill this objective is by providing a degree of transparency into the company. Allowing shareholders to know as much about the company as possible, while operating in an ethically defensible environment that is in accordance with regulations, can greatly help in this manner. Similarly, sharing respective facets of measures of compliance with the SEC and the Sarbanes-Oxley Act could also help to reassure shareholders in this regard. Additional ways of assuaging shareholders in this regard include providing details of company and product performance, especially as it applies to any….....

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