In our last column, we discussed the importance of prudently selecting third party consultants, contractors and joint venture partners when looking to expand your business in foreign markets. In other words, know your business partner. When looking to expand your business overseas it is equally important to ensure you have adequate internal controls. In other words, make sure your own house is in order.
The importance of internal controls is highlighted by the so-called “accounting provisions” of the Foreign Corrupt Practices Act (FCPA). Those provisions, which require accurate record keeping and sound systems of internal controls, apply to a large number of businesses—companies with securities registered with the Securities and Exchange Commission (SEC) and companies that must file reports with the SEC. Moreover, the FCPA accounting provisions apply to all dealings undertaken by the business, regardless of whether the business actually engaged in foreign operations or whether the transaction is legal.