Question

Views of Corporate Governance regulation are different per jurisdiction or state. These boundaries are govern by federal laws and SEC regulations. SEC developed extensive corporate governances such as SOX to regulate and create rules for a company to adhere to.

Stocks exchanges is a lucrative business therefore financial rules must be followed to establish fairness and in financial statement reporting that shareholders and stakeholders rely on to make investment decisions. Since the inception of SOX corporate governance laws has succeeded in bolstering companies internal controls for financial reporting. Executive compensation, excessive pay, backdating stocks, clawbacks, loyalty, good faith, business judgement rule, and the relationship between the audit committee, internal auditors and external auditors all play a major role on company outcomes therefore this issues must be monitored. As accounting professionals we have a duty to report fraud. Whistleblowing is a personal choice, and the rights and duties of workers are at stake because each employee is held responsible for the information that they have authority over. There is an obligation to report fraud, waste and the misuse.

Answer 1 or both of the following for discussion purposes.

What is the link between the internal controls environment and accountability.

Just because a person has a right to blow the whistle, does that mean she or he has a duty to blow the whistle, How might we make that determination?

Answer 1

1) Link between the internal controls environment and accountability.

Internal control environment provides the foundational basis for carrying out internal controls in an organization, because control environment sets the tone of an organization and it is the foundation for all other components of internal control, providing discipline and structure.

Internal control environment makes the organisation accountable by requring a high level of integrity and ethical value promoting honesty and integrity. It emphasis the management to maintain management philosophy and operating style which helps in minimizing the business risk and sets attitude toward internal controls over financial reporting

The control environment is greatly influenced by the extent to which individuals recognize that they will be held accountable. Accountability plays a critical role in carrying out internal controls in an organization. Sections 302 and 404 of the Sarbanes-Oxley Act (SOX) hold management in an organization accountable for financial reporting to ensure financial reporting is accurate and timely.

Accountability of management and employees is derived by how effective the internal control environment is in place. Auditors can set out their responsibilities, identify the areas where special audit consideration may be necessary and assess the risks of misstatement in the financial statements by understanding the control environments

2)

Whistleblower, an individual who, without authorization, reveals private or classified information about an organization, usually related to wrongdoing or misconduct. Whistleblowers play a vital role by raising the alarm on law-breaking, corporate negligence, malpractice, crime and safety issues

Anyone is entitled to blow the whistle if they feel they have witnessed wrongdoing at work, and will be protected by law if they do so. However, it is very important that employees have a clear understanding of what circumstances are considered reasonable cause for blowing the whistle and the measures they should take when doing so.