Accounting Theory and Corporate Governance

This document provides an analysis of the annual reports of BHP Billiton and Ausdrill Limited, focusing on their corporate governance practices and strategies. It discusses the disclosure of information, the composition of the board of directors, directors' independence, executive ownership, and indicators of corporate governance. The document also explores the importance of effective corporate governance in ensuring company success and the regulatory frameworks in Australia.

Running head: ACCOUNTING THEORY AND CORPORATE GOVERNANCE
Accounting Theory and Corporate Governance
Name of the Student:
Name of the University:
Author’s Note:

1ACCOUNTING THEORY AND CORPORATE GOVERNANCE
Table of Contents
Part A:..............................................................................................................................................2
Answer to Question 1:.................................................................................................................2
Answer to Question 2:.................................................................................................................2
Section a:.................................................................................................................................2
Section b:.................................................................................................................................2
Section c:.................................................................................................................................3
Section d:.................................................................................................................................3
Section e:.................................................................................................................................3
Section f:..................................................................................................................................4
Answer to Question 3:.................................................................................................................4
Part B:..............................................................................................................................................4
References......................................................................................................................................10

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Part A:
Answer to Question 1:
Annual report analysis of BHP Billiton and Ausdrill Limited elucidated that the
companies developed different sections in order to disclose their practices, policies and strategies
that is associated with corporate governance (Ausdrill.com.au., 2019). For this reason, certain
approaches implemented by these companies are of descriptive nature in a way that they can
effectually indicate the corporate governance aspects. In addition, the selected organisations
disclosed information concerning the factors related with corporate governance. From analysing
the BHP Billiton and Ausdrill Limited case analysis of all the important data is carried out
concerning corporate governance with reference to the stakeholder groups.
Answer to Question 2:
Section a:
There are 11 directors in BHP Billiton that is gathered from its annual report data and on
the other hand, there are around 7 directors in Ausdrill Limited in the year 2019
(Ausdrill.com.au., 2019).
Section b:
It is gathered from the annual report that BHP Billiton has 8 “non-executive directors”
that is around 72.73% of the overall directors. In case of Ausdrill Limited it is gathered that there
are around 6 non-executive directors that is round 85.71% of its total number of directors
(Ausdrill.com.au., 2019).

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Section c:
It has been analyzed from the annual report that in BHP Billiton Company from among
11 directors, 9 of them are independent that is around 81.82% of its overall directors (BHP.,
2019). In Ausdrill Limited there is limited disclosure regarding the directors’ independence as
observed from its annual report.
Section d:
The chairman of BHP Billiton Company is Ken MacKenzie and its Chief Execute Office
is known to be Andrew MacKenzie. From analysing their annual reports it is gathered that the
company has enhanced its structure related to capital allocation, modified its consideration on
culture and productivity as well as offering an excellent financial performance based on which
the company recorded its financial dividend to be $0.63 for each share (Bhp.com., 2019).
T. Mlikota is the Chief Executive Officer of Ausdrill limited and the Chairman of the
company is observed to be Ian Howard Cochrane. Based on findings of annual report, the
company is evidenced to deal with the decline within Australian mining industry with support of
its activities of business improvement and rationalisation. This has also further ensured better
shareholder returns.
Section e:
From analysing annual report of BHP Billiton, the directors are observed to attain 32% of
the company’s shares. However, the executive directors of Ausdrill Limited owned around 29%
of the company’ overall shares in year 2018 (Ausdrill.com.au., 2019).

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Section f:
After analysing annual report of both companies it is gathered that none of these
companies disclosed information related with the institutional investor and bock holders.
Answer to Question 3:
From analysing the annual report of Ausdrill Limited and BHP Billiton it has been
elucidated that these companies employed several indicators associated with corporate
governance. From evaluating BHP Billiton case there are several indicators like risk
management framework, remedial action plan, cultural value and purposes, board committee
along ith policies on stakeholder management and corporate governance (BHP., 2019).
On the other hand, Ausdrill Limited has several corporate governance indicators such as
audit and risk committee, human resource committee, social and governance committee, ethical
environment, along with digital business along with the technology committee. Considering
same, adequacy is observed within the corporate governance policies of both the companies
(Ausdrill.com.au., 2019).
Part B:
Introduction:
One among important factors in entertaining success of a company’s business is audit of
corporate governance and this can be explained as a technique of supporting the companies in a
way that they can manage their business in a better manner. One of the important aspects of this
technique is to offer the company’s ith the necessary guided doctrines that can guide and control
the company’s overall business conducts (Artiach, Gallery & Pick, 2018). Conversely, it is
observed that recently there have been several downfalls of companies that have raised issues

5ACCOUNTING THEORY AND CORPORATE GOVERNANCE
concerning effective and guidance of the corporate governance policies within the companies. It
has also been elucidated that the companies’ higher level management are involved in tampering
the corporate governance framework for getting involved in scandals of business and accounting.
Due to such reasons, corporate governance is considered to be important in ensuring companies
success (Carson, Fargher & Zhang, 2016). Considering such issue, the essay has the objective of
evaluating certain aspects related with corporate governance.
Discussion:
Prior to realising the corporate governance relevance, it is important to analyse that
devoid of suitable corporate governance framework there can be several reasons for company
failure as observed in case studies of companies in prior years. In such context, consideration of
external auditors can be taken into account as their unavailability results in decrease in
objectivity along with the independence of internal directors (Du Plessis, Hargovan & Harris,
2018). Along with the scandalous roles played by the Chief Executive Officers in contributing to
the business scandals, it is gathered that they also fulfilled the chairpersons’ job functions. This
necessitates importance of having effective corporate governance within companies structure of
compensation as lack of same might result in ineffective distribution of remuneration. Focussed
on all such reasons, an increased need is observed for effective corporate governance techniques
in decreasing any chances of corporate governance failure.
The business forms majorly employ two types of corporate governance that encompass
rules-based or principles-based techniques. In conformance with rules-based techniques there
exist several regulation and guidelines that might result in an compulsion on companies in
abiding by standards and guidelines related with corporate governance. For such reasons, it is

6ACCOUNTING THEORY AND CORPORATE GOVERNANCE
important for companies to abide by these regulations by implementing certain minimal
standards related with corporate governance (Kuan, 2015). Conversely, in conformance with the
“principles-based approach” associated with corporate governance that the companies might not
follow specific set of regulations. This is because companies face distinct corporate governance
concerns that need distinct solutions. Considering same, corporate governance alternatives
“rules-based approach” is the “principles-based approach”. This indicates that the companies
needed to maintain their frameworks of corporate governance through taking into account
several circumstances.
One important requirement for the companies listed within the Australian Stock
Exchange (ASX) is that they require developing their individual structure related with corporate
governance through abiding by principles and guidelines explained within “Australian Securities
and Investments Commission (ASIC)” and the “Corporate Law Economic Reform Program 9
(CLERP 9) (Riaz & Kirkbride, 2017). The explanation below indicates the CLERP 9 functions
and ASIC in maintaining effective corporate governance.
As per ASIC, obey of important performance influencers related with companies is better
framework of corporate governance. ASIC considered several corporate governance perspectives
and regularity body represented necessary guiding regulations for the companies that are ASX
listed for making sure that they work in conformance to distinct corporate governance needs.
These encompass necessary regarding the board of directors obligation along with other
informational aspects considered important for its associated stakeholders. Along with attaining
information related with issues of corporate governance within organisations, ASIC carries out
several engagement campaigns with its major stakeholders of the companies along with other
employees (Stewart, Kent & Routledge, 2015). Certain considerable areas of ASIC has

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developed important regulations and principles encompassing management conflict, mechanism
associated with risk management, shareholders involvement, oversight of directors along with
directors remuneration.
CLERP 9 in Australia has attained much significance as it obliges with the companies in
revealing all the important data associated with corporate governance in supporting the
betterment of the framework of financial reporting. The governing authority introduced several
needs related with CLERP 9 (Stewart, Kent & Routledge, 2015). In conformance with certain
new reforms, it is important for the companies in entertaining total disclosure of several
dimensions related with corporate governance that must encompass any differences in the
financial reporting and auditing processes. Certain other inclusions encompass attaining
information related with management disclosure and discussion of analysis along with data
related with licencing obligations. This is necessary in order to ensure better management of
interest conflict along with detailed disclosure of executive remuneration.
In maintaining a better framework of corporate governance, the organisations need to
entertain the existence of directors that are independent owing to certain act that directors are not
associated with companies that can affect the independent decisions. The major accountabilities
of these independent directors are to ensure organisational improvements credibility along with
corporate governance standards (Stewart, Kent & Routledge, 2015). Moreover, they are
considered as active observers of the companies. In addition, better business risk management is
another important responsibility for associated directors. The directors are held accountable to
develop necessary committees in the companies in developing better corporate governance
framework. For this reason, the companies independent directors requires offering necessary

8ACCOUNTING THEORY AND CORPORATE GOVERNANCE
guidance to the companies in a way that they can safeguard several factors related with corporate
governance.
The companies must ensure development of the corporate governance frameworks
through taking into consideration several ethical regulations. The guidelines related with
corporate governance followed within companies might lead to preference possibility between
higher management level. For such cause, management must consider the ethics in understanding
necessary decisions of business (Stewart, Kent & Routledge, 2015). Along with that, at the toe
the ethical guidelines exist, limits of corporate governance the organisations management in
implementing exceptional techniques with having the intention of attaining business goals. For
this reason, business sustainability over long duration can be ensured if there exist proper ethics.
Moreover, a significant link has been observed among structures of corporate governance
along with integrated reporting to companies. This is considering the fact that the major
objective of integrated reporting formation is to sustain the faith of stakeholders’ in businesses.
This might support in sustaining trust between companies management and the important
stakeholders. The integrated framework of reporting is dependent on importance and the main
consideration to consider internal processes of companies that can be improved linking both the
financial along with non-financial data within the annual reports. The company’s management is
capable to undertake certain important decisions along with allocating resources efficient manner
that might facilitate in long term value creation in existence of annual reports (Stewart, Kent &
Routledge, 2015).
It has also been taken into consideration that there are several countries that have
implemented corporate governance structure and Australia also does nor remain an exception in

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such situation. The framework of corporate governance is intended to be different in all the
nations that indicates different countries that having requirements of corporate governance. For
instance, it can also be gathered that the nations like USA and UK majorly focus on several
aspects associated with corporate governance in a way that stakeholders’ interest can be suitably
addressed. Conversely, in case of the nations such as European and Chinese nations, the
frameworks of corporate governance are developed for addressing shareholders interests
(Stewart, Kent & Routledge, 2015). This is basically after which attention is paid of interests of
stakeholders like staff, public and supplies. Moreover, the countries governments implement
effective standards of corporate governance in sustaining trust and faith among the shareholders
along with other important stakeholders.
Conclusion:
The report revealed that after analysing the BHP Billiton and Ausdrill Limited annual
reports, it has been elucidated that companies have developed different sections in order to
disclose their practices, policies and strategies that is associated with corporate governance. As
per ASIC, obey of important performance influencers of organisations is efficient framework of
corporate governance. ASIC considered several corporate governance perspectives and the
regularity body represented the necessary guiding doctrines related with ASX listed companies
for making sure that they work in conformance to distinct corporate governance requirements.
CLERP 9 in Australia has attained much significance as it obliges with the companies in
revealing all the important data associated with corporate governance in supporting the
betterment of the financial reporting framework.

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References
Artiach, T. C., Gallery, G., & Pick, K. J. (2018). A chronological review of the Australian
litigation risk environment surrounding IPO earnings forecasts. Pacific Accounting
Review, 30(2), 168-186.
Ausdrill.com.au., (2019). [online] Available at:
http://www.ausdrill.com.au/files/2018_Ausdrill_Annual_Report.pdf. .
Ausdrill.com.au., (2019). Home : Ausdrill. [online] Available at: http://www.ausdrill.com.au.
BHP., (2019). BHP | A leading global resources company. [online] Available at:
https://www.bhp.com/.
Bhp.com., (2019). [online] Available at:
https://www.bhp.com/-/media/documents/investors/annual-reports/2018/
bhpannualreport2018.pdf.
Carson, E., Fargher, N., & Zhang, Y. (2016). Trends in auditor reporting in Australia: a synthesis
and opportunities for research. Australian Accounting Review, 26(3), 226-242.
Du Plessis, J. J., Hargovan, A., & Harris, J. (2018). Principles of contemporary corporate
governance. Cambridge University Press.
Kuan, K. (2015). Why private interest theory should be used to evaluate the adequacy of the
auditor independence requirements in CLERP 9.
Riaz, Z., & Kirkbride, J. (2017). Governance of director and executive remuneration in leading
firms of Australia. Economics and Business Review, 3(4), 66-86.

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Stewart, J., Kent, P., & Routledge, J. (2015). The association between audit partner rotation and
audit fees: Empirical evidence from the Australian market. Auditing: A Journal of
Practice & Theory, 35(1), 181-197.