Financial Accounting and Compliance

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. 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 sort of publicity for the corporation. Nevertheless, one can also help to increase shareholder assurance by deploying various facets of big data and predictive analytics.

Techniques such as Bayesian machine learning (Harper, 2014) -- which combine statistical algorithms, artificial intelligence, and employee knowledge -- can produce a suitable degree of augury about most facets of organizations, including stock prices. Other information technology measures can also help to stabilize expectations for the future. Deep Learning algorithms can provide an even greater degree of efficacy in this matter. They require less training and time before producing results than classic machine learning does.

All of these techniques are viable for ensuring future performance, even within the volatile world of the stock market. A synthesis of all of these approaches, providing corporate transparency, demonstrating regulatory compliance, and utilizing artificial intelligence in myriad ways, can help to reassure shareholders of the stability of stock prices as best as possible. The consequences of a dearth of quality within financial accounting and reporting measures in a corporation can be devastating to numerous parties involved.

These include the employees, the shareholders, and even the Board of Directors and the Chief Executive Officer. Those consequences can perhaps most readily lead to non-compliance with regulations. The financial vertical has long endured a lengthy, profound degree of regulations that makes compliance a virtual prerequisite for any choosing to operate in this space. One of the surest ways of flouting compliance is to fail to implement the appropriate financial accounting and reporting measures. Therefore, these consequences can include monetary punishments as well as legal ones.

Moreover, these consequences can also lead to the decline of the corporation. That decline can include the plummeting of stock prices, as well as the eventual bankruptcy of the corporation. Perhaps the most eminent example of this sort of situation is that of Enron, which was one of the organizations that abandoned salutary accounting proactices and caused the creation of the Sarbane-Oxley act in the first place (Rouse, 2014).

However, the vast majority of these consequences can be mitigated if not outright eschewed by simply meeting regulatory compliance -- particularly in regards to financial accounting and reporting. Utilizing external auditing can help to decrease the incidence of fraudulent accounting and reporting. Moreover, utilizing a variety of external auditors can aid in this process so that there is not one auditing company that is attempting to give a corporation leniency in these matters.

Additionally, creating a company culture and organizational environment in which ethical behavior is encouraged -- and even rewarded -- can help to decrease these consequences. Contemporary legislation surrounding the rewarding of whistleblowers can also engender the same impact. There are numerous aspects of the Sarbanes-Oxley Act that directly correlate with accounting quality. It largely appears as though these truly are sufficient enough to protect stockholders and potential investors. This fact is particularly veracious when one considers the renewed emphasis on auditing that this act places upon publicly traded corporations.

The auditing controls are best summed up by the subsequent quotation in which there is a: "mandate that required public.