Sarbanes Oxley act is meant to reduce the degree of fraud by far in any organization through application of elements constituted in the act. In the case of Rite- Aid, corporate responsibility as highlighted in the act could have played a role in salvaging the company downfall. Corporate responsibility involves the senior executive of an organization taking individual responsibility for completeness and accuracy of the company financial report. The fall of Rite- Aid was preceded by series of unaccounted and unfair transactions, which clearly demonstrate lack of corporate responsibility among the CEO and other senior managements (En.wikipedia.org, 2019).
The other element highlighted in the act such as enhanced financial disclosure would have reduced the risk of fraud by greater depth, errors and fraudulent activities would have been detected in the early stages of the unethical practices and the problem rooted out before massive damage occur. The auditor’s independence in the case of Rite- Aid was ignored as Michael grass would frustrate the independent of the independent auditor. Independent auditing meant that the misstated financial statement provided to the shareholder would have been noticed as the auditor did his work. It is evident that the risk of fraud would have been reduced if the auditors were able to express their independent fair and true view of the company financial statement (Sec.gov, 2019)
The first recommendation would be to ensure that there is no existence of conflict of interest among employees of the organization and especially the senior management. The decision the management makes at time are influenced by personal interest that arise in case of a conflict of interest. The internal control system within organization should be enhanced through establishment of an internal audit committee that should keep affairs of the company in control. Internal auditors are able to establish mistake within the organization the organization as well as keep things in order within the company. The success of company is mainly dependent on the laid down internal control systems that are used to provide oversight to all employees and the management of the organization. Another recommendation would be establishment of policies that ensure accurate, reporting and full disclosure of financial report to the shareholder and other interested parties within the organization. The establishment of whistle blower policy can also work a great deal in helping identifying fraud as well preventing future fraudulent activities to occur. The whistle blower policy involves the individual of an organization raising a red flag in case they notice any suspicious activity within the company operating and management system (pennlive.com, 2019)
The recommendation highlighted above will positively affect the operation of business. With a good control system, a company is able to manage its affair in a matter that pleases the potential investors and access to investors’ fund may not be a problem. A proper internal control system also gives preference to customer’s (both international and local) satisfaction rather than focusing on profit alone. This satisfactory services are known to attract new potential customers as well as maintain the existing one. The recommendation outlined also point to the direction of company’s success; if the recommendation works properly the company will achieve a good rating among its competitors as well create a good brand image. This aspect of good ratings and good brand image also attracts the best performing and experienced chief executive officer and board members who are able to drive the company’s agenda to achieving the its objectives. The whistle blower policy notifies the company of any fraud and shareholders fund are protected meaning their investments gives a high return. The shareholder with guarantee of safeguarded fund and investment are able to pump in more fund into the company and hence keep the company afloat and with finances to explore many diverse investment opportunities managements (En.wikipedia.org, 2019).
Sec.gov. (2019). SEC Announces Fraud Charges Against Former Rite Aid Senior Management. [online] Available at: https://www.sec.gov/news/press/2002-92.htm [Accessed 11 Sep. 2019]..
En.wikipedia.org. (2019). Sarbanes–Oxley Act. [online] Available at: https://en.wikipedia.org/wiki/Sarbanes%E2%80%93Oxley_Act [Accessed 11 Sep. 2019]
pennlive.com. (2019). [online] Available at: https://www.pennlive.com/news/2016/02/rite_aids_rise_and_fall_a_time.html [Accessed 11 Sep. 2019]