Impact of Foreign Corrupt Practices Act on U.S. Business

Gao ID: AFMD-81-34 March 4, 1981

Congress enacted the Foreign Corrupt Practices Act in response to widespread questionable corporate payments. The law, which makes offering payments to foreign officials to obtain or influence business illegal, also contains significant internal accounting control objectives and recordkeeping requirements. GAO solicited information from 250 corporations regarding the Act's impact on corporate activities.

The Act has brought about efforts to strengthen corporate codes of conduct and systems of internal accounting controls. However, many corporations believe that the cost of complying with the Act exceeds the benefits derived. More than 30 percent of the corporations engaged in foreign business reported that they had lost overseas business as a result of the Act. There is also extensive dissatisfaction with the clarity of the Act's accounting provisions. Increasing the uncertainty over what constitutes compliance with the Act is the controversy over whether the provisions include a materiality standard. The Act's antibribery provisions have also been criticized as being ambiguous. In addition, many corporations believe that they are suffering a competitive disadvantage due to the lack of an international antibribery agreement.


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