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Serious Crimes Whose Costs.docx
1. [Solved] Serious Crimes Whose Costs
[Solved] Serious Crimes Whose CostsREPLYOVERVIEWThe student will post one reply for
this discussion. Your one reply must be a critique of the other student’s Discussion: Internal
Controls and Ethics Analysis in this course. instructions :The critique should be between
1000 and 2500 words, twelve-point type. The student will claim the work to be critiqued by
a posting in reply to the selected student’s work. The critique will consist of a thread in
reply to the selected student’s work. A proper critique will address each item in the Case
Analysis in order, starting with the Case Summary, stating whether you agree with the
posted work and adding such comments as you think will add to the Case Analysis. Each
question must be written and addressed separately. The Statement of Christian World View
must be commented upon. If an item (Case Summary, question, or Statement of Christian
World View) was omitted, you must supply the missing item.Internal Controls and Ethics
Analysis – Walmart de MexicoIn 2012, Walmart was in the middle of a hug bribery scandal
in Mexico. The company allegedly paid governor officials as much as $24.5 million dollars to
provide faster access to store building permits (Rarick, 2018). Why does the U.S. cared
about what Walmart was doing in Mexico? Many companies complained that it put them at
a disadvantage in competing with other companies abroad. Does enforcing a code of ethics
on business abroad makes sense? In this summary, we will explain what happened with
Walmart de Mexico and the Foreign Corrupt Practices Act.The New York Times did an
investigation about Walmart de Mexico in 2012. What they found was an incredible amount
of corruption and an incredible amount of disregard for the law in Mexico. This is hard to
believe, but when we look at how widespread the corruption was among Walmart
executives in Mexico we just realize, when it comes to other countries, they just ignored
regulations and did not care at all.There were several other cases of corruption in Mexico,
but the one that I would like to highlight is a Walmart built in 2004 in a very specific area in
Mexico near ancient pyramids. The Aztecs referred to these pyramids as the sun and the
moon and it is considered a very historical area. Because of that, there were certain zoning
rules and regulations that prevented Walmart from building near the pyramids. But they
decided they wanted to build the new Walmart store one mile away from the pyramids.
Officials said that Walmart could not do that for a number of reasons. First of all, the traffic
congestion there was already terrible, and they did not want to add more congestion. They
also did not want to shut down the local businesses there, and bringing a Walmart would
cause local business to leave. Another problem was that, when it comes to ancient ruins,
anthropologists and archeologists could have said that there are ancient ruins in the area
2. where this Walmart was built and, as a result, they did not want to have that building there
for excavations needed to be done. (Blevins & Green, 2013). What Walmart eventually did is
that they went to a government publication that basically takes the new zoning laws and
publishes it and paid out to those who work for the gazette. When the gazette published the
new zoning map, they made one change, and that one change was that Walmart would be
able to build their superstore on that area. Starting with a $52,000 bribe to change the
zoning map, Wal-Mart de Mexico bribed their way to get the store built. (Blevins & Green,
2013).The New York Times reported:The Time’s examination reveals that Wal-Mart de
Mexico was not the reluctant victim of a corrupt culture that insisted on bribes as the cost of
doing business. Nor did it pay bribes merely to speed up routine approvals. Rather, Wal-
Mart de Mexico was an aggressive and creative corrupter, offering large payoffs to get what
the law otherwise prohibited. It used bribes to subvert democratic governance — public
votes, open debates, transparent procedures. It used bribes to circumvent regulatory
safeguards that protect Mexican citizens from unsafe construction. It used bribes to outflank
rivals (Barstow, 2012).There were several different Walmart’s that were built in Mexico
where corruption was involved, according to the New York Times, with many of them.
There were several other bribes in other countries as well. (MMR, 2013). Executives in the
U.S. started hearing about these briberies and did an internal investigation. (Knapp,
2022).Bribery is one characteristic of a corrupt society and we see that clearly happened
with Walmart de Mexico. God’s law prohibits the taking of a bribe. Exodus 23:8 say: “Do not
accept a bribe, for a bribe blinds those who see and twists the words of the innocent” (NIV).
The same rule is repeated in Deuteronomy 16:19: “Do not pervert justice or show partiality.
Do not accept a bribe, for a bribe blinds the eyes of the wise and twists the words of the
innocent” (NIV). The negative effects of taking a bribe are visibly outlined in these bible
verses. Bribery clouds the truth and perverts or twists the words of those who would be
righteous in the sight of God. Bribery is one example of a company engaged in unethical
behavior. Ethics is about knowing and doing what is good or right, and workplace ethics is
about knowing and doing what is good or right at work. Applying the Bible can help us
decide and do what is ethical or moral at work. Whatever you do, work at it with all your
heart, as working for the Lord, not for human masters, since you know that you will receive
an inheritance from the Lord as a reward. It is the Lord Christ you are serving. (Colossians
3:23-24).Identify control activities that Walmart could have implemented for Walmart de
Mexico and its other foreign subsidiaries to minimize the likelihood of illegal payments to
government officials. Would these control activities have been cost-effective?Walmart could
have established an anti-corruption policy for Walmart de Mexico and its other foreign
subsidiaries. Such policy should be documented and communicated to all employees in the
U.S. and its foreign subsidiaries, and enforced to all levels of the company, from top level
management, administrative, executive, supervisory, to entry-level employees. Walmart
could have also implemented and maintained an adequate set of internal audit controls like
keeping separate ledger accounts for expenses related to gifts and rewards to foreign
employees and foreign government officials, keeping tabs on money that is withdrawn from
the petty cash account, and keeping a separate ledger account for payments that are made
to outside third-party vendors.These control activities would have been cost-effective.
3. Every internal control and policy establishment has a cost to the organization. Each process
must be designed, implemented, operated, and then tested, sometimes both internally and
externally. For the design of a policy and an internal control to be considered effective, the
control cost should not be more important than the potential benefits of the control.What
responsibility, if any, does an accountant of a public company have when he or she
discovers that the client has violated a law? How does the accountant’s position on the
company’s employment hierarchy affect that responsibility, if at all?What responsibility
does an auditor of a public company have if he or she discovers illegal acts by the client?
Does the auditor’s position on his or her firm’s employment hierarchy affects this
responsibility?Accountants might be worried about facing subsequent retaliation in the
workplace; however, they are responsible for protecting the public from financial and
company fraud. Sometimes, that means reporting or disclosing a corrupt or dishonest
situation of a client or employer who is violating a law. No matter the position on the
company’s employment hierarchy an accountant is held to the same code of ethics. In July
2016, the International Ethics Standards Board for Accountants (IESBA)
adopted “Responding to Noncompliance with Laws and Regulations”, which applies to all
accountants.It sets out a first-of-its-kind framework to guide professional accountants in
what actions to take in the public interest when they become aware of a potential illegal act,
known as non-compliance with laws and regulations, or NOCLAR, committed by a client or
employer. (IESBA, 2016).The auditor’s position on his or her firm’s employment hierarchy
does not affect this responsibility. According to AU Section 317.10 “Audit Procedures in
Response to Possible Illegal Acts”When the auditor becomes aware of information
concerning a possible illegal act, the auditor should obtain an understanding of the nature
of the act, the circumstances in which it occurred, and sufficient other information to
evaluate the effect on the financial statements. In doing so, the auditor should inquire of
management at a level above those involved, if possible. If management does not provide
satisfactory information that there has been no illegal act, the auditor should consult with
the client’s legal counsel or other specialists about the application of relevant laws and
regulations to the circumstances and the possible effects on the financial statements.
Arrangements for such consultation with client’s legal counsel should be made by the client.
The auditor should also apply additional procedures, if necessary, to obtain further
understanding of the nature of the acts. (PCAOB, 2016).Does an audit firm of an SEC
registrant have a responsibility to apply audit procedures intended to determine whether
the client has complied with the FCPA? Defend your answer.Yes, an audit firm of an SEC
registrant are responsible for applying audit procedures to decide whether clients have
complied with the FCPA. The mission of the SEC is to protect investors, maintain fair,
orderly, and efficient markets, and facilitate formation. (SEC, 2022). They ensure that public
companies are being honest about their business practices and risks so that investors can
make fully educated decisions when engaging in investment activities regarding a company.
As an SEC registrant, a company is supposed to tell the truth about their business, the
securities they are selling, and the risks involved in investing in those securities. (SEC,
2022). Companies need to be transparent when providing any information to all potential
external users and it is expected that auditors pay attention to a company’s compliance with
4. FCPA. Failing to do this, a company could be at risk to be investigated regarding their
knowledge of any violations of FCPA. This is what happened with Walmart de Mexico.
Furthermore, in 2019, SEC charged Walmart with violating the books and records and
internal accounting controls provisions of the FCPA by failing to operate a sufficient anti-
corruption compliance program for more than a decade as Walmart experienced fast
international growth.If the citizens of certain foreign countries believe that the payment of
bribes is an acceptable business practice, is it appropriate for U.S. companies to challenge
that belief when doing business in those countries? Defend your answer. Yes, it is
appropriate for U.S. companies to challenge that belief when doing business in those
countries. Dealing with public officials creates many ethical and compliance challenges,
such as bribery and corruption, for companies that do business internationally. These
activities in the workplace are serious crimes whose costs go far beyond criminal penalties
and large fines. FCPA prevent such activities. Organizations can manage and minimize the
risk of FCPA violations by educating employees on how to deal with public officials and
communicating clear guidelines on acceptable and unacceptable
behavior.ReferencesBarstow, D. (2012). Wal-Mart Hushed Up a Vast Mexican Bribery Case.
The New York Times. Retrieved from https://www.nytimes.com/2012/04/22/business/at-
wal-mart-in-mexico-a-bribe-inquiry-silenced.htmlBible Gateway. (2022). Colossians 3:23-
24. New International Version (NIV). Retrieved
from https://www.biblegateway.com/passage/?search=colossians+3%3A+23-
24&version=NIVBible Gateway. (2022). Deuteronomy 16:19. New International Version
(NIV). Retrieved from
https://www.biblegateway.com/passage/?search=Deuteronomy+16%3A19&version=NIVB
ible Gateway. (2022). Exodus 23:8. New International Version (NIV). Retrieved
from https://www.biblegateway.com/passage/?search=Exodus+23%3A8&version=NIVBle
vins, J., & Green, B. P. (2013). Examining Foreign Corrupt Practices Act Compliance
Issues. Internal Auditing, 28(2), 3-12. Retrieved
from http://ezproxy.liberty.edu/login?qurl=https%3A%2F%2Fwww.proquest.com%2Ftra
de-journals%2Fexamining-foreign-corrupt-practices-
act%2Fdocview%2F1353341301%2Fse-2%3Faccountid%3D12085IESBA. (2016).
Responding to Non-Compliance with Laws and Regulations. Retrieved
from https://www.ethicsboard.org/focus-areas/responding-non-compliance-laws-and-
regulationsKnapp, M.C. (2022). Contemporary Auditing. 12th Edition. Cengage
Learning.MMR. (2013). Walmart Grapples with Bribery Scandal in Mexico. Business
Insights: Global. Retrieved from Retrieved from https://bi-gale-
com.ezproxy.liberty.edu/global/article/GALE|A316953094?u=vic_liberty&sid=summonPC
AOB. (2016). AU Section 317. Illegal Acts by Clients. Retrieved
from https://pcaobus.org/oversight/standards/archived-standards/pre-reorganized-
auditing-standards-interpretations/details/AU317Rarick, C. A., Williams, H., Barczyk, C., &
James, A. (2018). Walmart de Mexico and the Foreign Corrupt Practices Act: Stepping Over
the Border and Stepping Over the Line. Journal of Leadership, Accountability and Ethics,
15(1), 43-
50. http://ezproxy.liberty.edu/login?qurl=https%3A%2F%2Fwww.proquest.com%2Fschol