Corporate Compliance

Introduction

Retail Company Inc a well renowned publicly traded retail facility seeks to minimize risk and maximize shareholders wealth. Retail Company Inc in an effort to comply and align corporate governance implements recommendations by Committee of Sponsoring Organization of the Treadway Commission.

Managing enterprise risk across the entire industry of retail requires managers to address internal controls. An internal control regulates preventive, detective and corrective purposes. In the recent years, scandals imposed requirements by federal, state and local governments to inflict laws, compliances, and acts to discourage unethical decision-making.

This paper identifies policies, reporting practices, reviews, audits, cost of compliance and conflict of interest strategies that companies contend with to meet fiduciary obligations. As well as corporate governance defined as structure and the functioning of corporate policy- discrepancy between management and the shareholders in exercising control thus achieving the right balance between managerial discretion and small stakeholders’ protection. Consequently, firms develop an optimal balance considering other constituencies and stakeholders (creditors, employees, suppliers, clients, investors) of the firm (Murphy & Topyan, 2005). In the process, enterprises implement audits to maintain an ethical environment and enforce codes to deter wrongdoings.

Distinguish among preventive, detective, and corrective Internal Controls

Preventive controls defined as measures to discourage errors or irregularities (Indiana University, 2004). Such as computer applications, reading and understanding human resources process, and managers reviews of purchases to validate prior approval to avoid over expenditures.

The article defines detective controls designed to identify an error or irregularity after it has occurred. For instance, exception reports identify defects, validation of cash receipt vouchers, and managers’ review of phone misuse charged to account.

Corrective internal controls designed to correct errors or irregularities that have been detected (Stockton University, 2007). Such as errors that occur during posting of accounts in bookkeeping through an oversight or inexperience individual or program вЂ" the use of benchmarking other company’s best practices that have encountered similar risks offers the opportunity for correction of the process.

According to this article, internal controls have limitations. Internal controls provide a reasonable assurance and some inherent in all internal controls such as judgment, breakdowns, management override, and collusion.

In the retail industry managers’ responsibilities to manage risk, people, assets, change, shareholders values, performance, sustainability, and corporate governance. The retail industry reporting policies comply with the Sarbanes-Oxley act implementing checks and balances for better, faster and efficient accountability. The accounting reporting process complies with section 404 of the Sarbanes-Oxley act (SOX), and based on the Committee of Sponsoring Organization of the Treadway Commission (COSO) recommendations.

The COSO framework provides direction and criteria for improving an organization's ability to manage risk. Moreover, the enterprise risk management framework is fully aligned with the PricewaterHouse (PwC) authored COSO Internal ControlвЂ"Integrated Framework, which is now used by most organizations as the basis for their reporting under section 404 of Sarbanes Oxley. This enables organizations to build on their investment in internal control as they make improvements in risk management (PricewaterHouse Cooper, 2007).

Implementing preventive, detective and corrective internal controls in the retail industry is critical in order to maximize shareholders wealth. Thus, the COSO framework is broader identifying three key differences in risk management. Such as considers risks during strategy setting, requires management to form a view of how much risk the organizations is prepared to accept, known as risk appetite, and requires that risk management be done outside of silos through a portfolio view of the organization's risks (2007). COSO provides long-term compliance for the retail industry’s growth and ERM for stakeholders’ value.

Recommend a preventive solution that Incorporates Risk Mitigation

Committee of Sponsoring Organizations of the Treadway Commission (COSO), is a U.S. private-sector initiative, formed in 1985. Its major objective is to identify the factors that cause fraudulent financial reporting and to make recommendations to reduce its incidence. COSO has established a common definition of internal controls, standards, and criteria against which companies and organizations can assess their control systems (Wilkipedia, 2007).

Reccomondations based on COSO : First, eencourage managerial staff to conduct internal control evaluations by analyzing the environment and processes by which it pursues its primary business objectives. This pertains to each department’s core business processes and supporting activities, which include both financial and non-financial activities (Evaluations of Internal Controls, 1999).

In an effort to minimize risk and maximize shareholders wealth senior managers, directors, internal, external auditors, and risk owners to work together (Sobel & Reding, 2004). The process to align Retail Company Inc, with corporate strategies according to COSO framework is critical: by implementing think tanks within each department assigning an administrator to deliver the results to senior management weekly. These think tanks will meet daily before beginning of each shift to engage all employees in the process. This process allows employees the opportunity to evaluate the processes in effect. As well as each administrator from each department meet weekly to evaluate the processes and make necessary adjustments - with on going training addressing security issues, accounting procedures, and uncertainties that occur during the process.

Paul Sobel author of the article” Aligning Corporate Governance with Enterprise Risk Management” identifies the positive and negative outcomes of retail reaching the objectives (2004). The above-mentioned

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