Federal Statutory Liability Flashcards
Describe the Foreign Corrupt Practices Act.
It is a U.S. federal law known primarily for tow of its main provisions, one that addresses accounting transparency requirements under the Securities Exchange Act of 1934 and another concerning bribery of foreign officials.
What brought about the Foreign Corrupt Practices Act?
The Act was a post-Watergate response to illegal foreign bribes paid by U.S. companies.
What is the focus of internal accounting controls?
These controls focus on Asset Accountability.
T or F: SOX section 404: Assessment of internal control supplements the Foreign Corrupt Practices Act’s internal accounting controls with internal financial controls.
True.
What is the focus of internal financial controls?
These controls focus on the integrity of information flowing into the financial statements.
Describe the Racketeer Influenced Corrupt Organizations Act (RICO)
Provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization. The RICO Act focuses specifically on racketeering, and it allows for the leaders of a syndicate to be tried for the crimes that they ordered others to do or assisted them, closing a perceived loophole that allowed someone who told a man to, for example, murder to be exempt for the trial because that person did not actually commit the murder.
List the four elements of a violation of the RICO Act as outlined in Section 1962(c) of the Act.
A violation of Section 1962(c) requires: (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.
What is the purpose of the RICO Act?
To prevent organized crime’s infiltration into legitimate business.
T or F: The RICO Act provides for only criminal penalties.
False. The Act provides for extended criminal penalties and a civil cause of action for organized crime.
Describe the condition that must exist for the attachment of mail or wire fraud liability.
The use of mail or wires must be an essential part of the fraudulent scheme for liability to attach.
What actions are considered a crime under the SOX Act with regard to the destruction of evidence?
- Destruction of records
- Willful failure to retain audit review work papers
- Corrupt tampering with documents to be used in an official proceeding
List the two federal fraud provisions under which accountants can be held criminally liable.
- Mail fraud
- Wire fraud
Describe the SOX federal securities crime provision.
“Whoever knowingly executes, or attempts to execute, a scheme or artifice - (1) to defraud any person in connection with any security [of a public company]; or (2) to obtain, by means of false or fraudulent pretenses, representations, or promises, andy money or property in connection with the purchase or sale of any security of an issuer [of a public company]…- shall be fined under this title, or imprisoned not more than 25 years, or both.
Describe the whistleblower protection under the SOX Act.
The Act punishes those who retaliate against whistleblowers who lawfully provided information to their supervisors or the federal government regarding conduct believed to be in violation of the securities law.
List three document-related activities that are criminally punishable under SOX Act.
- Failure to retain audit records for seven years
- Destruction of records in a federal matter
- Corrupt tampering with documents.
