Ethics and Compliance Paper Essay

Walmart is one of many companies who report its filing with the United States Securities and Exchange Commission. The purpose for writing about Walmart’s Ethics and Compliance paper is to inform the reader about Walmart’s important compliance processes. SEC filings, analysis of financial statements, requirement for certification and legal proceedings will be explained throughout further reading. Procedures for Ethical Behavior Walmart has an official statement of ethics which is meant to be applied to not only the associates and directors employed by the organization but also third parties.

These third parties include suppliers, consultants, public relations firms, contractors and all other third party companies who conduct business with Walmart in any fashion. Due to the fact that Walmart does conduct business in several countries the statement of ethics may be modified to coincide with the laws and customs of each country. To conform to the statement of ethics written out by Walmart, associates expect to follow the laws written by their city, state, and country at all times. These employees are also responsible for not only reading the Guiding Principles but also understanding and using those principles every-day.

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Employees do not expect to memorize these policies; however they are expected to learn those that apply directly to their jobs. If an employee has a question or concern they should not be afraid to ask help from a manager or report any inappropriate conduct. If there was anything to happen and an investigation would take place with Walmart employees, the employees are expected to cooperate with and ensure the investigation remain private and come up front with any news that any employee’s may have.

Along with these requirements of employees, Walmart has additional responsibilities for managers to ensure the ethical behavior is conducted. If an ethical issue is brought to a manager’s attention, it is their job to report this to the Global Ethics Office at the Walmart Corporation. Managers are also expected to meet with their employees as a group to review the Guiding principles and answer any questions that may arise. Managers encourage always putting ethics first in the event that an ethical issue is in conflict of business objectives.

It is the manager’s duty to lead by example, and ensure that just because one ethical mistake is made that this does not continue within their department. Open communication between managers and employees is a must and no issue should ever be put aside regardless of the magnitude. Along with these responsibilities and requirements, discipline is handed down for those in violation. Actions are taken up to and including termination for violation of the organizations ethics policy.

SEC Compliance Processes The most important process that Walmart uses to comply with SEC is to make SEC filings in accordance to the law. A sample of these filings can be examined at: http://finance. yahoo. com/q/sec? s=WMT. This page gives a list of 8K and 10Q filings made by Walmart with SEC. Also of utmost importance, the finance department at Walmart prepares the financial information and statements required by the SEC like the Income Statement, Balance Sheet and Cash Flow Statements.

The company is then required to give a description of the management discussions and analysis of financial statements, more disclosures, controls and procedures and other information as required under part B. It is also necessary to provide Other Information relating to the company. The most important process of compliance that appears in the report is the signature certifying that the report is in compliance with Section 13(a) or 15(d) of the SEC Act of 1934. The act of signing makes the President and Chief Executive Officer responsible for the information contained in the reports.

The requirement for certification makes it important for the CEO and the CFO to ensure that the information contained in the report is correct. Other organization processes are somewhat mechanical. For instance, the legal proceedings, including those against the company need to be listed. The legal department will provide a comprehensive list of the legal proceedings. Three officers, the President and the CEO, the Executive Vice-President and CFO as well as the Senior Vice President and Controller must sign the filings.

For detailed report on the filings please see: http://yahoo. brand. edgar-online. com/DisplayFiling. aspx? dcn=0000104169-08-000006. The information about these processes in the organization is obtainable by examining the actions that show compliance with SEC requirements. One of the best places to get information about the internal processes of Walmart is to examine the proceedings of the law suits filed against Walmart and the disclosures in the court contains information about the internal proceedings of Walmart.

The following web sites offer one the opportunity to examine Walmart’s compliance with SEC requirements: http://walmartstores. com/Investors/SECFilings. aspx or http://www. wakeupwalmart. com/press/article. html? article=784. Apart from this, the SEC is responsible for the enforcement of the Sarbanes-Oxley Act, the Investment Advisers Act of 1940, the Investment Company Act of 1940, Trust Indenture Act of 1939 and the Securities Act of 1933. In consideration of the Sarbanes Oxley Act, the CPA auditor of Walmart is required to comment on the internal control of the company.

The auditor of Walmart, Ernst & Young carries out the requisite examination of the internal control at Walmart and makes comments about the internal control at Walmart. Walmart’s Financial Performance over the Last Two Years Financial ratios are used to identify the strengths and weaknesses of a company. The current ratio, debt ratio, return on equity ratio, and days receivable ratio will be used to identify Wal-Mart’s financial health. The ratios used will be for 2008 and 2009 to obtain a brief look at the company’s financial health.

The first ratio is the current ratio. The current ratio tests for a company’s liquidity (Keown, Martin, Petty, & Scott, Jr. , 2005). The simplest and most basic test for a company’s relative liquidity is the current test, which divides the company’s current assets by its current liabilities. In 2008, Walmart’s current assets were $48,020 million and the current liabilities were $58,478 million for a ratio of 0. 8. In 2009, Walmart’s current assets were $48,949 million and current liabilities were $55,390 million for a ratio of 0. 9.

The ratios indicate that the Walmart’s financial health was slightly better in 2009 than it was in 2008. Because a company’s assets may be financed by debt or equity it is important to consider a company’s debt ratio. The debt ratio shows relatively how well a company manages its assets or rather how much of its assets are in the form of debt (Keown, Martin, Petty, and & Scott, 2005). The debt ratio is the total debt divided by the total assets. To determine Walmart’s total liabilities for 2008, its shareholder’s equity of $64,608 is ubtracted from its total liabilities and shareholder’s equity for a total liability of $98,906 million. Walmart’s total assets for 2008 were $163,514 million for a ratio of 0. 6. Its 2009 total liabilities were $98,144 and total assets for 2009 were $163,429 for a ratio of 0. 6, which indicates that the company’s debt ratio has remained steady over the past two years. Return on equity is valuable information that show’s how well a company can generate cash. To find the ROE, we use the following equation, Net Profit ? Average Shareholder Equity for Period= Return on Equity.

Plugging the numbers into this equation resulted in Walmart acquiring an annual ROE of 20. 6% in 2009. By comparison, the company’s annual ROE in 2008 was 20. 2%. Both the 2008 and 2009 figures are very good but the increase from year to year indicates that Walmart did an even better job at generating cash in 2009 than it did in 2008. This shows that the company is financially healthy and makes it more attractive to investors. Days receivable is a ratio that measures how long a company’s customers take to pay for their purchases.

The shorter the time, the better, because a low days receivable ratio shows that a company has good liquidity. To find days receivable, we multiply 365 (because there is 365 days in a year) by average accounts receivable and then divide this figure by net sales. This results in Walmart having a days receivable ratio of 3. 43 days for 2009 and 3. 16 for 2008. The ratio for 2009 was a little higher than in 2008, but this probably is not cause for too much concern because both of these ratios are extremely good and show that the company has great liquidity. Conclusion

Based on the Walmart analysis, the information paints a clear picture that the SEC compliance processes are necessary for the organization to remain profitable and ethical. The visual picture helps the reader understand what requirements are essential to remain in good standing with the SEC. One would like to think that a company which does not report filings with the SEC would continue to remain financially trustworthy. However, the SEC has established compliance processes like the SEC filings, analysis of financial statements, and requirement for certification, as well as a company’s legal


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