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Codes of conduct have long been a feature of corporate life. Today, they are arguably a legal necessity--at least for public companies with a presence in the United States. But the issue goes beyond U.S. legal and regulatory requirements. Sparked by corruption and excess of various types, dozens of industry, government, investor, and multisector groups worldwide have proposed codes and guidelines to govern corporate behavior. These initiatives reflect an increasingly global debate on the nature of corporate legitimacy. Given the legal, organizational, reputational, and strategic considerations, few companies will want to be without a code. But what should it say? Apart from a handful of essentials spelled out in Sarbanes-Oxley regulations and NYSE rules, authoritative guidance is sorely lacking. In search of some reference points for managers, the authors undertook a systematic analysis of a select group of codes. In this article, they present their findings in the form of a "codex," a reference source on code content. The Global Business Standards Codex contains a set of overarching principles as well as a set of conduct standards for putting those principles into practice. This codex is meant to be used as a benchmark by those wishing to create their own world-class code. The provisions of the codex must be customized to a company's specific business and situation; individual companies' codes will include their own distinctive elements as well. What the codex provides is a starting point grounded in ethical fundamentals and aligned with an emerging global consensus on basic standards of corporate behavior.

Members of the Public Co. Accounting Oversight Board--a private-sector, nonprofit body created by the Sarbanes-Oxley Act of 2002--must determine the form and content of a new auditing standard on internal control that will fulfill the requirements of Section 404 of the act. After receiving comments from issuers, investors, and accounting firms, board members contemplate the necessary scope of an audit engagement to evaluate the effectiveness of internal controls and restore investors' confidence in financial reporting. Gives students an opportunity to consider the role of external regulation and self-regulation and such issues as the difficulties of cost-benefit analysis for proposed regulations, the relation between rules and discretion, the differences between investor and executive perspectives, and the apportionment of responsibilities among management, internal auditors, and external auditors.

Supplements the (A) case.