Risks of Noncompliance in Corporate Governance

Essay by rlunday September 2010

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Running head: RISKS OF NONCOMPLIANCE IN CORPORATE GOVERNANCE� � PAGE \* MERGEFORMAT �1� �� RISKS OF NONCOMPLIANCE� � PAGE \* MERGEFORMAT �13� ��

Risks of Noncompliance in Corporate Governance

MMPBL/570

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Risks of Noncompliance in Corporate Governance

Introduction

Corporations such as Enron, WorldCom, and Tyco forced Congress to enact the Sarbanes-Oxley Act (SOX) because of mismanagement and fraud. This new law requires financial reporting and disclosure within corporate governance. To meet the expectation of investors, McBride Financial Services, Inc. (MFSI), must develop corporate governance and find solutions that will address any issues of noncompliance that could hurt their reputation. To create the best practices in corporate governance, this paper will address the cost and risks associated with noncompliance and offering recommendations. Additionally, analyses for several organizations that have been either successful or unsuccessful in their compliance are critiqued. Organizational compliance can be achieved through effective corporate governance; to be in noncompliance could hold negative results that could lead to litigation or possible lawsuits.

Compliance vs. Noncompliance of Recommendations

Sarbanes-Oxley Act, make CEO's and CFO's responsible to certify the financial reports of their individual companies. New criminal penalties are placed, if the CEO's or CFO's report false statements for destroying or altering financial statements or records. These regulations sent a strong message to the companies and their top management that they would not stand any activity such as Enron or WorldCom.

Many of the Sarbanes-Oxley Act requirements had no problems implementing, but Section 404, resulted in protests from the corporate world. The most controversial element of this Act was, the requirement of the outside auditor, who would evaluate the procedures that companies would follow to have correct financial reporting. "The problem, is it often is in federal legislation, is that the detailed rules required to put those tenets...