Manager's Guide to the Sarbanes-Oxley Act: Improving Internal Controls to Prevent Fraud PDF
Preview Manager's Guide to the Sarbanes-Oxley Act: Improving Internal Controls to Prevent Fraud
Page i Manager's Guide to the Sarbanes-Oxley Act Page ii This page intentionally left blank. Page iii Manager's Guide to the Sarbanes-Oxley Act Improving Internal Controls to Prevent Fraud SCOTT GREEN Image Page iv This book is printed on acid-free paper. Copyright © 2004 by Scott Green. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey Published simultaneously in Canada No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-646-8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, 201-748-6011, fax 201-748-6008. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. For general information on our other products and services, or technical support, please contact our Customer Care Department within the United States at 800-762-2974, outside the United States at 317-572-3993 or fax 317-572-4002. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our Web site at www.wiley.com. Library of Congress Cataloging-in-Publication Data: Green, Scott, 1962– Manager's guide to the Sarbanes-Oxley Act: improving internal controls to prevent fraud / Scott Green. p. cm. Includes bibliographical references and index. ISBN 0-471-56975-5 (CLOTH) 1. Corporations— Accounting. 2. Corporations—Corrupt practices. 3. Corporations— Accounting—Law and legislation. 4. Disclosure of information—Law and legislation. I. Title. HF5686.C7G5687 2004 658.4'73—dc22 2003020250 Printed in the United States of America 10 9 8 7 6 5 4 3 2 1 Page v To my wife Gabriella. Your support and untiring efforts on my behalf made this work a reality. Page vi This page intentionally left blank. Page vii Contents FOREWORD ix PREFACE xi ACKNOWLEDGMENTS xvii CHAPTER 1 Sarbanes-Oxley Myth 1 Legislating Evil Out of Our Corporations 2 Employees, Fraud, and Lessons Forgotten 6 Why You Should Not Rely on Auditors 8 You Can't Trust the Lawyers Either 11 Supporting the Fraud Culture 12 What Really Works 20 CHAPTER 2 Control Smart Approach 23 Smart Basics 26 Case Study: Andy Fastow's Shell Game 30 CHAPTER 3 Threats and Dangers 33 How to Recognize a Pending Nightmare 34 I See It. Should I Worry? 39 Whose Job Is It Anyway? 44 CHAPTER 4 Know Yourself 47 Do You Have Decision Rights? 47 Key Activities Model 51 Tell Your Story 59 CHAPTER 5 Identify Where You Are Vulnerable 63 What Are Controls? 64 Pull Levers—Often 67 Activities That Improve Your Business 72 Page viii CHAPTER 6 SMART LINKS 81 Step 1: Establish Behavioral Boundaries 84 Step 2: Choose Your Customers 88 Step 3: Did You Get What You Paid For? 90 Case Study: Greed's Siren Song: Dennis Kozlowski 93 Step 4: Who's Reading Your E-mail? 95 Step 5: What's It Really Worth? 100 Step 6: Growth Busters! 105 Step 7: Has Your Ship Sailed? 112 Step 8: Keep Everyone Happy 114 Step 9: Cash Is the Same as Money 116 Step 10: Where Did It Go? How Do You Know? 117 Step 11: Take Your Temperature Often 118 Step 12: Speaking Out Loud to a Crowd 121 Case Study: The Cynthia Cooper Story 137 Step 13: Knowing the Best and Brightest 139 CHAPTER 7 PROTECT YOURSELF 145 Find Those Gaps: The Dentex Case 146 Applying Smart Links 149 Interrupting an Embezzlement 159 Finishing the Job 161 Applying Smart Links to Financial Reporting Processes 163 CHAPTER 8 MONITOR YOUR HEALTH 171 What Is Driving Your Business? 172 We Know We Are Better! 173 Are We There Yet? 174 What Happens Now? 176 CHAPTER 9 A CALL TO ACTION 181 EPILOGUE 185 APPENDIX A Statement of Values 191 APPENDIX B Key Performance Indicator Reporting 194 APPENDIX C Examples of Key Performance Indicators 196 APPENDIX D Control Activities 198 APPENDIX E Example of Section 302 Certification 208 APPENDIX F Attestation Checklist 210 NOTES 217 BIBILIOGRAPHY 219 SUBJECT INDEX 227
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