Corporate Governance and Accounting Scandals

This assignment examines the consequences of accounting scandals on corporate governance practices. It specifically focuses on the impact of such scandals on top management, Chief Financial Officer (CFO), and auditor turnover. Students are required to analyze relevant research findings and evidence presented in scholarly articles to understand the intricate relationship between accounting scandals and corporate governance mechanisms.

Running Head: ACCOUNTING AND CORPORATE GOVERNANCE 1
Current Issues in Accounting and Corporate Governance
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ACCOUNTING AND CORPORATE GOVERNANCE 2
Introduction
This essay covers the corporate turnaround of the Bellamy’s Australia Limited which is
driving maker and wholesaler of Australian fabricated infant items. Bellamy's Australia Ltd is an
organic infant formula and a producer and distributor of baby food. It is the completely owned
subsidiary of Bellamy’s Australia. There are many factors that led to the downturn of a well
operational company (Armstrong, et al., 2015). Moreover, the disorientation of the company in
regards to the compliance with ASX Corporate Governance Principles is considered as a matter
of study in this essay (Bell, Filatotchev & Aguilera, 2014).
Major Issues
The major issues that the company has been facing are regarding the drastic decrease in
its sales which was most predominant in China. It was further observed that the online sales of
the company were also restricted in New Zealand and Australia. Berger, Imbierowicz & Rauch,
2016 said that it has been directly associated with the limited stocks of the company which had
direct implications on the sales (Berger, Imbierowicz & Rauch, 2016).
The company had penetrated in China and was planning to go further into South-East
Asia. As per Bushee, Carter & Gerakos, 2013, the share price was shockingly decreased which
also had major implications on the revenue. Moreover, the regulatory changes in the China had
made the matter worse as compared to the company’s anticipation of an oversupply of the infant
products and the expected sales (Bushee, Carter & Gerakos, 2013).
Regulatory Point Of View
Form the regulatory point of view, the misinterpretation of the market done by Bellamy’s
is supposed to be the most likely method of reasoning behind the usage of the administrative
changes of the legislature of China (Agrawal & Cooper, 2017).
The company is also considered to have missed understanding the set of new regulations
which caused it to make incorrect evaluations regarding its sales and revenue especially in the
market of China. According to Filatotchev & Nakajima, 2014, the company also failed to pay a
much required amount of attention to the purchasing preference of the customers in China.
Bellamy’s failed to have establishments of enough traction and awareness through the promotion

ACCOUNTING AND CORPORATE GOVERNANCE 3
and marketing prior to the entry in the market that would have assisted in getting aware of the
feasibility (Filatotchev & Nakajima, 2014).
Corporate governance
The effectiveness of the most plausible solutions in regards to a dress the issues that the
company has faced in terms of downfall in the shares and stock prices along with the declines in
both the deals and stocks would start with the suggestions as per ASX Recommendation 4.1 that
expresses that means Bellamy's Board to build up the Audit, Finance and Risk advisory group in
the nation like China with key reason to help the Board in directing the outer review, money
related announcing and frameworks for the administration of dangers alongside the control of the
interior structure of the business that was led in China (Ginena, 2014). The organization ought to
include a Committee having controls and recognition on the Audit, Risk, and Finance operations.
This committee should consist of three directors of non-executive nature along with the
Chairman heading the committee (ArAs, 2016). This would have controlled the utilization of the
financial and other aspects in regards to the advancement of the Bellamy’s in the form of
business expansion in a country like China. It needs to comply with ASX Recommendation 4.2
which would include the farming of the financial statements for a particular time period from the
CEO and COF (Joseph, Ocasio & McDonnell, 2014).
Effective Risk Management Framework
In order to identify and manage the risk in a much better way, the company needs
Bellamy's Australian Limited needs to establish an effective risk management framework within
the business in the other market where it is intended to have its business expansion. For this
respect, it has to comply with the ASX Recommendation 7.1 which refers to the formation of the
board to have for overseeing the risks. As per Larcker & Tayan, 2015, the board will have a
minimum of 3 members, a major part of which would be comprised of independent directors and
would be chaired by an independent director (Larcker & Tayan, 2015). The ASX
Recommendations 7.1 should be gathered by Bellamy's Australian Limited and ought to unveil
the contract of the board alongside the individuals from the board. The organization should also
mention the number of times the board had meetings throughout at regular intervals and
attendance of the individuals associated with risk management (Mason & Simmons, 2014).

ACCOUNTING AND CORPORATE GOVERNANCE 4
The organization ought to likewise reveal the procedures and certainties that it needs to
utilize with the end goal of directing the structure of the hazard administration in the worldwide
market. The subtle elements of the gatherings and participation of the representatives must be
accounted for in the Annual Report of the organization which would help the organization
recognizing the dangers that could occur in the universal market including the dominance of the
international retailers’ over the product manufactured and distributed by Bellamy’s Australia
Limited (Misangyi & Acharya, 2014).
Bellamy’s has to effectively employ the process of current risk management in
communication with the Finance, Audit and Risk council in the global branches or having
successful surveys and examination couch the systems of hazard administration in the worldwide
market (Peters & Romi, 2014). This would assist the company in having the much-required
turnaround. Complying with the ASX Recommendation 7.2, the company, through the renewed
board or committee would assist in identifying, monitoring, assessing and managing the risk
associated with the sales and the prices in market like China (Armstrong et al., 2015).
The disclosure of any materialistic changes associated with the risk profile in the
conduction of business would be assisting Bellamy’s in having a turnaround in business.
Bellamy’s should intend to furnish the disclosure of the matters contemplated by the
requirements of ASX Recommendations 7.2 in its annual reports which would assist in assessing
various factors that could pose much risks in market like China.
Bellamy’s should comply with the ASX Recommendation 6 due to which it can build
good relationships with the share or security holder by providing them with suitable facilities for
allowing them with exercise the right in an effective manner. The ASX Recommendation 6.1
would incorporate the arrangement of data with respect to the administration of the organization
to the financial specialists and investors situated in the worldwide market like China through its
site which would help the organization n having compelling and clearness in regards to its
prerequisites shapes the investors (Starbuck, 2014).
The ASX Recommendation 6.2 needs to be compiled by the company through which it
can structure out and execute a program for the investor relations for facilitating mutual
communication with the shareholders and the investors effectively that would assist the company

ACCOUNTING AND CORPORATE GOVERNANCE 5
in making the business operation easier (Tricker & Tricker, 2015). Through the compliance Of
ASX Recommendations, 6.3, the company needs to disclose the processes and policies that it
conducts so as to enhance and facilitate the role of security holders for effective conduction and
regulation on the sale prices of the products of the company. Complying with ASX
Recommendations 6.4 would assist Bellamy’s to provide the security holders the choice to be at
the receptive end of the communication to and from the company in an electronic way which
would enhance the channeling of communication regarding business. This would assist the
company in having effective control over the market prices along with the inventory of its
products (Yermack, 2017).
The genuine inquiry that the organization is looking for this situation is with respect to no
power over the stock and stock in the worldwide market. Once the results of Bellamy's have been
delivered, to the partners and customers which are the retailers, the evaluating and the deals have
not been under the control of the Bellamy's. The actualities and conditions which have been
incorporating the case are with respect to the slicing down of the stocks and the cost of the infant
results of the organization. The conceivable arrangement that must be joined by the organization
is investigated subsequent to considering the entre situation, the game-plan that Bellamy's have
to consolidate is the correct and successful control on the whole store network administration and
stock control in the International market. The best game-plan that the organization needs to take
after is to shape an advisory group or board in the universal market to which it is shipping its
items which would be accountable for directing the whole procedure of offers and stock control.
The reason of picking this system is to increase better control over the business operations of
Bellamy's Australia Limited in the worldwide market which would influence the organization to
have compelling turnaround. This would also enhance the success of the company and prevent it
from facing such grave issues in future.
The strength of the paper is in the recommendation that is provided to the company for
having effective turnaround. The implementation and compliance with ASX Recommendation 7
regarding the “ Recognize and Manage Risk” by Bellamy’s would assist the company in devising
ways and strategies that are required for having effective control on the business operations and
supply chain management in the international market. The quality of the divulgence of the
yearly report in regards to the Finance, Audit and Risk components would encourage the

ACCOUNTING AND CORPORATE GOVERNANCE 6
organization in distinguishing the escape clauses that happened beforehand and can devise routes
in having appropriate control on the costs of the items that are sold in the universal market.
However, the limitations of this approach would be the risk that completes disclosure of the
finance and audit strategy would be increase the vulnerability of the company regarding prices as
the shares were slumped in the recent past. The restrictions of the investigation are that the
wellsprings of data for leading the exploration are essentially from the sources on the Internet
and diary article.
References
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ACCOUNTING AND CORPORATE GOVERNANCE 7
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