Part one a) Before accepting the appointment, the audit partner of the firm must ensure that: The firm is competent i.e. it has the necessary staffs with appropriate skills to complete the audit. There are no conflicts of interest that cannot be managed easily. This may exists as the firm may have other clients in this sector. The staffs with the necessary skills are available. It may happen that the required staffs are occupied for other clients at a busy time of the year. The firm is independent. There may be the problem relating to holding shares in the client or there may be staffs that are related to the client. They seek the permission of the directors to communicate the present auditors. If same is refused, the auditor must reject the proposal. …show more content…
Good Corporate Governance states that CEO and Chairman of the board must be two different people. Another person must be appointed as the chairman of the board. The Chairman controls the board whereas the CEO runs the company. Mr. Osh possesses too much power being both the CEO and the Chairman. The Board There are more executive that non executive directors i.e. five executive and two non executive directors. Good Corporate Governance suggest that there must be a balance between executive and non executive directors. Executive directors may dominate the board. It is recommended that there must be a majority of non executive directors. Else the board will have more executive powers. Appointments Mr. Osh possesses too much power. He can appoint anyone he wants as board member. There is no care about the quality of
- The successor should review previous audits in order to whether problems exist that may impact the successor’s acceptance of the audit. Also, the successor should review previous audits in order to have confidence in the current/past figures presented on the client’s financial
Corporate governance is the rules in which companies are controlled. This governance essentially balances the
142). The Hershey Company`s board can be described as an Anglo-Saxon model, which is typically for American companies. It is a one-tier board, where the employees of the company has no direct affiliation or representatives among the directors. This may be a source of Type 3 agency problems (stakeholder vs. shareholders) (Thomsen and Conyon, 2012, p. 20). The board is led by the companies` CEO, Mr. John Bilbrey while other directors are in charge of different committees. Pearce and Zahra (1991) examine the relative power of the CEO and the board. Their matrix suggest that The Hershey Company board is a Participative board as both the CEO and the board exercise a lot of power. John Bilbrey has been involved with The Hershey Company in several positions since 2003 several years and is likely to enjoy the trust and favor of the board of directors through his seniority and as the company stock has been steadily increasing throughout his period at the wheel (Thomsen and Conyon, 2012, p. 172). Due to the fact that he also is on the board himself, he also get to know the board better and get better handling of them.
Corporate governance is a set of actions used to handle the relationship between stakeholders by determining and controlling the strategic direction and performance of the organization. Corporate governance major concern is making sure that the strategic decisions are effective and that it paves the way towards strategic competitiveness. (Hitt, Ireland, Hoskisson, 2017, p. 310). In today’s corporation, the primary objective of corporate governance is to align top-level manager’s and stakeholders interest. That is why corporate governance is involved when there is a conflict of interest between with the owners, managers, and members of the board of directors (Hitt, Ireland, Hoskisson, 2017, p. 310-311).
As Canadian Coalition for Good Corporate Governance indicates that the good governance of a corporation is essential to creating long-term sustainable value and reducing investment risk. In other words, the high quality performance of board directors plays a key role in the success of a corporation. We evaluate it based
Phenomenal growth of interest in corporate governance has emerged in recent years. The body of literature on the subject has grown markedly in response to successive waves of large corporate failures. Furthermore, there have been numerous attempts to define what constitutes ‘good corporate governance’ and to provide guidelines in order to enhance the quality of corporate governance.
To the extent of prevention of corporate failure, I argue that three ASX principles and recommendations could halt the demise of Dick Smith. Firstly, the 2nd principle which is “Structure the board to add value” by structuring the board with a majority of independent directors would prevent CEO dominance because some suggest that independent outside directors can reduce the influence of dominant individuals (ASX, 2014, p. 17). In accordance with Gallagher and Bennie (2015, p. 20), the independent directors are likely to focus on the company’s objectives and not to make decision relying on others. Furthermore, an addressing of independent directors would reduce the reliance on management, and create the effectiveness on monitoring (Dechow et al. 1996 cited in Christensen, Kent, and Stewart (2010)), as well as capability to lessen the conflict of interest between managers and shareholders (Hardjo & Alireza, 2012, p. 4). Thus, DSE’s board would be more active to monitor the CEO’s performances because independent directors pay attentions to the interest of company (Gallagher & Bennie, 2015, p. 20) and shareholders (Hardjo & Alireza, 2012, p. 4)
Parnell (2014) reports that firms that have CEO duality, where the CEO is also the chairman of the board of directors, can suffer from issues regarding the willingness of independent board members not exerting enough control over board decisions. Wells Fargo is an organization that practices CEO duality, as former CEO John Stumpf was the CEO as well as chair of the board of directors (Pender, 2016). This practice may have delayed appropriate and timely action by the board of directors to rectify the fraud issues earlier. The lack of independence that board members have at Wells Fargo may have also helped lead to the appointment of Tim Sloan as the new CEO, as Sloan was reportedly very close with the former CEO (Pender, 2016). Interestingly, Bank of America and JPMorgan Chase, two other large financial institutions, also practice CEO duality. It will be interesting to see if issues develop at these firms in the future, or if more financial institutions begin to appoint separate board chairs and CEOs, as Citigroup has done.
The most evident conflict of interest evident by the CBA financial planning scandal is in relation to the member’s remuneration for professional services rendered. The very engagement between the client and professional equates to a conflict of interest with the client attempting to utilise the professional’s services
The executives are accountable to the board of directors. Instead of protecting the investors, the board enticed the culture of financial fraud in the company for selfish gains. It failed in its duties in keeping the executives in check.
actions have a severe impact on the organization. The Board needs to warn the founder that they
To be able to look more closely at what makes a balanced board, it is important to review its purpose and responsibilities. The UK Corporate Governance code states that the board is taking the “ultimate responsibility for the impact of the company on others”. It has a duty towards their Shareholders, as they own the company and entrust its direction and control to the board of directors. The board’s responsibilities include, but are not limited to setting the bank’s strategy, reviewing and approving a bank’s financial statements, the approval of communications that go out to shareholders and the press. Furthermore, the board looks at appointing and the removal of external auditors, confirming changes in
However it is also important to keep in mind that good corporate governance is not just the outcome of appropriate selection and effective functioning of an independent Director. Every director, whether independent/non independent, executive/non-executive has a distinct role in the functioning of the company. It is only when the entire board functions effectively which results to good
Because a board of directors has the right to terminate an irresponsible CEO, only when all board members agree with one another can they stop a corrupt CEO from committing criminal behavior.
A corporate structure enables a company to maintain the separation between its owners and its management through the implementation of corporate governance. Corporate governance provides companies with monitoring changes in corporate hierarchy as well as ensuring the protection of shareholder interests. Most corporations break down its hierarchy into two tiers. The first tier is made up by shareholder elected officials called the Board of Directors. The board of directors is further broken down into three distinct categories: the chairman, the inside directors, and the outside directors. The Chairman is chosen by the Board of Directors and acts a liaison between the company and the shareholders. Inside directors can either be members of higher-level management or corporate shareholders. Also known as executive directors, inside directors oversee internal corporate affairs. Outside directors are external parties that provide unbiased viewpoints to corporate decision making. The second tier includes the executives who provide the corporation with executive, financial, and operational support. Popular examples include: the Chief Executive Officer, the Chief Financial Officer, and the Chief Operations Officer. Both tiers correlate efforts to ensure that shareholder interest is maximized (The Basics of Corporate Structure 2015).