The characteristic of corporate governance in the United Kingdom is based on ‘comply or explain’ approach i.e. either organisations’ need to comply with the existing code or need to explain new code to government authorities. The compliance with the board related recommendations of the UK Code of Corporate Governance is expected to minimise the agency problems and to enhance the performance of organisations. Agency relationship is an agreement under which the principal appoints the agent in order to perform certain services. As a part of agency relationship, principal renders certain decision-making power to the agent. In agency relationship, problem arises regarding how to encourage the agent to perform in the best benefits of the principal (Biswas & Bhuiyan, 2008). Since industrial revolution, large organisations have continued to bring considerable changes in financing, ownership and administration forms. New technologies are continuously modernised, demanding huge investment in the industry. In order to supply money for this huge investment, people from diverse segments of society are looming in different industries with their savings. As a consequence, many sole proprietorship businesses are turning into joint stock businesses. In such type of businesses, the risk bearing activities of proprietorship and managerial activities are performed by diverse parties. These parties often have conflicting nature of interests. For instance, the interest of shareholders is to enhance the equity of organisation, without considering the value of debt. On the other hand, interest of creditors is to enhance the probability of organisations to repay debt, which often hinders organisations to undertake risky projects. On the other hand, interest of managers is to increase their individual return rather than the return of external investors. This return of managers can differ owing to the incorporation and influence of strategies which justify paying them higher salaries to ascertain diversion of resources for individual advantages. Even the different shareholders of an organisation have diverse interests. The large shareholders have interest to control the organisation and they desire to maximise their returns at the cost of smaller shareholders. These differences in interest at times can cause principal-agent problem between owners and managers. In agency relationship, managers bear the whole cost of failing to pursue their individual objectives, but capture only a fraction of the advantages (Biswas & Bhuiyan, 2008). Control mechanisms are vital to minimise the divergence of agents’ interests from principals’ interests. Corporate governance is possibly the broadest control instrument used for effective deployment of business resources. Corporate governance acts as a network between different parties of agent relationship for enhancing their value in the organisation. The UK Code of Corporate Governance offers certain recommendations for the board with respect to leadership, efficiency, responsibility, compensation and relationship with shareholders in order to minimise the agency problems (Financial Reporting Council, 2012). Although the recommendations for board are intended to minimise agency problem in an organisation, these recommendations are not perfect for numerous reasons. For example,
Governance, Accountability and Audit Table of Contents Question 1 3 Question 2 7 Question 3 12 Question 4 16 References 20 Question 1 Corporate governance is considered as the set of mechanisms which assists in protecting the interests of shareholders. Corporate governance also facilitates in enhancing the economic perspective with regard to an organisation…
Apple Inc. was instituted in the year 1977 and is headquartered in California, United States of America. The paper then evaluates Apple’s compliance to the US market practice. Conclusively, the paper discusses the corporate governance practices of Apple Inc. and attempts to relate it to its performance in the Stock Exchange.
As the role of the auditor comes increasingly below the highlight pursuing up to date global financial instability, it is believed that it is essential that the accountancy occupation re evaluate the role of audit and guarantee and approach up with positive, realistic approach which both can help in developing and maintain profitable business.
Relationship between accounting, accountability and organizational control Accounting is a business language mostly used in the world of business to describe all transactions entered into by an enterprise hence it is used by individuals associated with business.
. Accounting is the means to identify elements of sales, expenditure and profit as well as budgets, inventory and forecasts. Thus it is a method of achieving accountability as it monitors and accounts for every financial transaction and thus keeps a check on fraud, embezzlement and suspicious acts within the firm.
A statutory auditor is a certified external auditor who has the statutory obligation to certify the accountability of the firm’s financial statements in accordance with professional auditing standards (European Commission 2011). In order to ensure stakeholder confidence regarding the transparency of the auditing process, it is necessary to promote the independence of statutory auditors.
rules are followed in the conduct of transactions-in particular financial transactions.A dispassionately conducted internal audit directly contributes to meeting the objectives of corporate governance as well as the tranasparency attained is as well the transparency conveyed.The Enron and WorldCom scandals have illustrated on the one hand the wide extent to which audit functions had been extended to misrepresent facts and figures and on the other the inadequacies of the extant compulsions normally imposed by a robust corporate governance regime.UK Corporate governance prescriptions have evolved substantially in recent years.They have imposed additional responsibilities on the audit function,
The focus here could be on audit committee and its role in corporate governance or even the role of audit committee as it relates to financial projection of companies and government expenditure and the audit committee whether in private or public sector could be primary or central to the financial reporting of a company and is an essential part of maintaining open and transparent financial systems within any firm.
This was anticipated as a major change in UK auditing system and may increase time & cost of implementation if APB is not involved proactively with the IAASB. With this understanding APB engaged with IAASB proactively to help them in their "Clarity Project" thereby completely stopping the release of their own versions of standards except for the ones required by the local laws & regulations.
The corporate governance principles provide guidelines on how to control a company to ensure that its objectives are fulfilled in a way that is beneficial to the company and adds long-term value to the interests of the
It is identified promoting the internal audit coverage of these processes is a potential way to achieve greater operational transparency and to gain investor confidence. The major aim of this project is to
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