Question

Part I. How does SOX Section 806 impact whistleblowing? Part 2. Dodd-Frank Wall Street Reform and Consumer Protection Act a. List Dodd-Frank's main provisions (Hint: they go beyond whistleblowing) b. State Dodd-Frank's limits on whistle-blowing awards to the following: > An internal accountant or auditor > An auditor of a public company > An employee of an audit firm who observes issues with its firm's auditing of a public company c. Give an example of how a corporation might comply with Dodd-Frank in form...but not in substance.

Answer 1

Answer :

Part I.

SOX Section 806 provides protection to whistle blowing employee, officer, contractor, subcontractor or agent of Public Traded Companies and its subsidiaries and nationally recognized statistical rating organizations that provide evidence of fraud. The whistle blowing employee is protected from retaliation of employer and further grade such act of retaliation as criminal act and authorizes department of justice to book such act of employer as criminal offense.

Part 2.

a. The main provisions of Dodd Frank Act are as follows:

• Banks to come up with plans for a quick shutdown if they approach bankruptcy.
• Financial institutions to increase reserve to account for potential future slumps.
• Bank with more than $50 billion of assets to perform annual “stress test,” given by the Federal Reserve
• The Financial Stability Oversight Council (FSOC) to identify risks that affect the financial industry and keeps large banks in alert.
• The Consumer Financial Protection Bureau (CFPB) to protect consumers from the corrupt business practices of banks and check banks from risky lending.
• The Office of Credit Ratings to ensure agencies to provide reliable credit ratings.
• A whistle-blowing provision to encourage anyone with information about violations or fraud to report ito government.

b.

Generally, under Dodd-Frank Act, internal auditors or accountant are excluded from receiving whistle blowing award as they have pre-existing legal duty to report fraud. But they become eligible when disclosure to SEC becomes a necessity to avoid substantial injury to financial interest of investors, if entity is impeding investigation or when 120 days has passed with no action on reported violation or fraud.

Usually, an external auditor is excluded from receiving whistle blowing award. But there are situations where whistle blowing is granted. External auditors can whistle blow if the firm fails to comply with Section 10 A rule of Dodd Frank Act.

An employee of audit firm can whistle blowing only when audit firm could be shown being failed in assessment, investigation or reporting any wrong doing in accordance with Section 10 A of Dodd Frank Act.

c.

Corporation can meet deadline set by the Dodd Frank Act as per the time plan envisioned under different provisions of this Act. This way, it can ensure compliance with Dodd-Frank Act in form, if not in substance. It shall be noted that Dodd-Frank Act is evolving. There are reforms and new proposals. There are changing regulations of corporate governance and public disclosure. Complying in substance, may force company to bear additional expenses and pose challenges for management team.