Companies must follow several different rules or standards in the business environment. These rules and standards can affect businesses differently, depending on their size, number of employees, consumer products and operational facilities. Business owners and managers must ensure their company meets these compliance issues in order to remain in business. Typically, the three major compliance issues come from financial, government or contract areas.
Companies must comply with national accounting standards when recording and reporting financial transactions. Publicly held companies are held to more strict standards when making financial investment decision because of the stake that shareholders and other business stakeholders have in the company. Generally accepted accounting principles and the Sarbanes-Oxley Act of 2002 are the primary financial standards companies must comply with. In addition, companies may need to undergo external audits to prove that the financial information is accurate and valid as presented.
Federal, state and local government agencies can impose rules and regulations companies must follow when operating in the business environment. These issues relate to taxes, product standards, human resource policies and retirement benefits, among other issues. Business owners and managers will spend copious amounts of time reviewing the government compliance issues that affect their company and ensuring they will not incur penalties or fees for noncompliance. Government penalties can be fairly severe and restrict a company from continuing operations until the company completes the resolution process.
Contract compliance involves the professional relationships between two or more companies. Business owners and managers engage in these relationships to accomplish the goals and objectives of their company. Compliance issues can arise when one party in the agreement fails to complete tasks or activities according to predetermined standards. Similar to financial compliance issues, companies may undergo audits to ensure all parties in the contract are acting appropriately and avoiding issues that can create dangerous legal situations.