FCPA accounting provisions
The accounting provisions of the FCPA apply only to those issuers who are required to keep accounts and records which accurately reflect the transactions and dispositions of its assets. A company may be liable if its records:
- Fail to identify the improper nature of a recorded transaction or conceal improper activity by disguising records
- Omit a transaction, such as a bribe, illegal commission or other improper payment.
Internal controls
In order to provide reasonable assurances that transactions are executed in line with the authorization of management, issuers are required to maintain a system of internal accounting controls. All transactions must be recorded in a manner that permits the preparation of financial statements that conform with generally accepted accounting principles (GAAP) and to maintain accountability for assets. Access to assets is allowed only with management's authorization; accountability for said assets must be compared with the existing assets at reasonable intervals. Appropriate action must be taken with respect to any differences, if and when identified.
Obligations of minority owners
Using its influence to have the company maintain and develop a system of internal accounting controls is the issuer's responsibility. A minority owner—an issuer who owns fifty percent or less of the voting power of another company--is subject to modified accounting provisions.
National security exception
If an issuer's liability results from its cooperation with the federal government on a matter concerning national security, the accounting provisions of the Foreign Corrupt Practices Act do not apply.
Liability for acts of subsidiaries
Even if improper conduct has occurred outside of the U.S., issuers can be held liable for the actions of their foreign subsidiaries. The scope of liability is based on the issuer's incorporation of the subsidiary's financial statements in its own records and SEC filings.
SARBANES-OXLEY
If senior management certifies statements which fail to disclose known violations of the Foreign Corrupt Practices Act's accounting provisions, they may be liable under the Sarbanes-Oxley Act.