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Professional Accountant assignment
Finance & Accounting
Pages 9 (2259 words)
Comparison of the UK approach to governance with the US approach United States corporations abide by a rules-based approach to corporate governance. Most of them rely on the Sarbanes Oxley Act of 2002.
The method is highly structured, punitive and paternal. The intention of the Act is to ascertain that the process of financial reporting is done effectively. It also seeks to reorient accountants back to ethical ways. Furthermore, the approach focuses on maintaining corporate governance at the top. A principles-based approach is the domain of the UK. The Cadbury report defines the UK’s method of corporate governance. It states that corporate governance is a mechanism for directing and controlling companies (Cadbury, 1992). This document was later followed by others like the Combined Code. In essence, all these reports seek to place corporate governance responsibilities in the hands of company boards. An institution must alter corporate governance issues in accordance with their context. Furthermore, individuals are expected to make their choices known to their shareholders. Therefore, in the rules-based approach, as practiced in the United States, parties answer to external bodies while in the principles-based approach, institutions answer to their shareholders (Tricker, 2008). While the United Kingdom places the responsibility of oversight on individual firms, the United States has an accounting oversight board which acts independently and ensures compliance. ...
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