What is lacking in the German compliance regime for internal financial controls – in comparison to the U.S. approach – and what has to be changed in terms of legal and practical compliance regulations regarding internal controls over financial reporting?
This paper is organized as follows. Part II explores the Wirecard scandal, with special emphasis on the failures in internal financial controls. Part III then examines the U.S. legal framework in this domain, most importantly the Sarbanes Oxley Act of 2002 but also the Sentencing Guidelines, the Caremark Decision, the doctrine of respondeat superior, and the use of deferred- and non-prosecution agreements (DPAs and NPAs) to support enforcement of compliance obligations. The aim of this analysis is to illustrate how a healthy and effective compliance system regarding internal control over financial reporting is organized and enforced. Part IV then examines the current legal framework in Germany to implement a compliance system, finding, in effect, that there is none, at least as compared to the US model. Part V then turns to the question of reform in the German legal and regulatory landscape, analyzed from the perspective of the US model, with a special focus on the potential impact of the proposed Act to Strengthen Business Integrity (Verbandssanktionengesetz).
Inhaltsverzeichnis (Table of Contents)
- I. Introduction
- A. Sarbanes-Oxley Act of 2002
- II. Background and research focus: What happened at Wirecard?
- III. Key Elements of an effective compliance system in the U.S. regarding internal controls over financial reporting
- B. Aspects of the US Compliance Landscape that Reinforce SOX..
- 1. The Sentencing Guidelines and the “Seven Elements of an Effective Compliance Program”
- 2. Caremark
- 3. Respondeat Superior
- 4. DPA/NPA....
- IV. The German approach to implement an effective compliance System regarding internal controls over financial reporting.
- A. Branch-specific regulation
- B. German corporate Governance Codex.
- C. §91 (2) of the Stock Exchange Act [AktG].
- D. Duty of care, §§ 76 (1), 93 (1) of the Stock Exchange Act [AktG]
- E. § 130(1) of the Act on Regulatory Offences [OWIG].
- F. Requirements to implement a compliance program…….....
- V. Practical implications and measures
- A. Implementation of Deferred Prosecution Agreement and Non-Prosecution Agreements...
- B. Monitoring...
- C. Company liability.
- D. New legislation: Act to Strengthen Business Integrity (Verbandssanktionengesetz)..\n
- E. Guidelines on how to implement a compliance program...\n
- VI. Conclusion.....
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This paper aims to compare the German and U.S. compliance systems for internal financial controls, specifically examining the effectiveness of each system in light of the Wirecard scandal. It investigates how the U.S. legal framework, particularly the Sarbanes-Oxley Act and its supporting regulations, contributes to a robust compliance culture. The paper then analyzes the current German legal landscape, identifying the lack of a comparable regulatory framework, and explores potential reforms based on the U.S. model.
- Internal financial controls and compliance systems
- Corporate fraud and misconduct
- Comparison of legal frameworks in the U.S. and Germany
- The impact of the Wirecard scandal
- Proposed reforms and the need for legal regulation in Germany
Zusammenfassung der Kapitel (Chapter Summaries)
- I. Introduction: This chapter introduces the topic of corporate fraud in Germany, focusing on the Wirecard scandal as a recent and prominent example. It highlights the importance of internal financial controls within modern compliance systems and raises the question of what is lacking in the German approach compared to the U.S.
- II. Background and research focus: What happened at Wirecard?: This chapter provides a detailed account of the Wirecard scandal, highlighting the failures in internal financial controls that led to the discovery of missing funds from the company's accounts.
- III. Key Elements of an effective compliance system in the U.S. regarding internal controls over financial reporting: This chapter delves into the U.S. legal framework for compliance in the area of internal financial controls, focusing on the Sarbanes-Oxley Act of 2002 and its supporting regulations. It explores the importance of the Sentencing Guidelines, the Caremark Decision, and the doctrine of respondeat superior in creating a robust and effective compliance system.
- IV. The German approach to implement an effective compliance System regarding internal controls over financial reporting.: This chapter analyzes the German legal landscape regarding compliance systems for internal financial controls, highlighting the absence of a comprehensive regulatory framework similar to the U.S. model. It explores existing regulations and case law, including the German Corporate Governance Codex and relevant provisions of the Stock Exchange Act.
- V. Practical implications and measures: This chapter examines the practical implications of the U.S. approach and explores potential reforms for the German legal and regulatory landscape, focusing on the proposed Act to Strengthen Business Integrity (Verbandssanktionengesetz).
Schlüsselwörter (Keywords)
This paper focuses on the themes of internal financial controls, corporate compliance, corporate fraud, the Wirecard scandal, the Sarbanes-Oxley Act, the German Corporate Governance Codex, and the Act to Strengthen Business Integrity. It explores the legal frameworks in the U.S. and Germany and highlights the need for a robust regulatory environment to mitigate corporate misconduct.
- Quote paper
- Joel Ziv (Author), 2021, Germany's compliance system for internal financial controls after Wirecard. What can be learned from the United States?, Munich, GRIN Verlag, https://www.grin.com/document/1133634
