Accounting Theory and Corporate Governance

This study material discusses the importance of accounting theory and corporate governance in ensuring the success and sustainability of companies. It covers topics such as the principles and standards of corporate governance, the role of ethics, and the connection between corporate governance and integrated reporting. The material provides insights into the compliance requirements for ASX-listed companies and the need for independent directors in the board. It also explores the different approaches to corporate governance and the global perspectives on corporate governance frameworks.

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

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Table of Contents
Answer to Part A........................................................................................................................2
Requirement 1........................................................................................................................2
Requirement 2........................................................................................................................2
Requirement 3........................................................................................................................3
Answer to Part B........................................................................................................................4
References..................................................................................................................................9

2ACCOUNTING THEORY AND CORPORATE GOVERNANCE
Answer to Part A
Requirement 1
It can be seen from the annual report of JB HI-FI Limited and Newcrest Mining
Limited that both of these companies have provided all the information about their corporate
governance policies, procedures and practices under a separate section in the annual report
named Corporate Governance. In addition, both of these two companies have provided
numerical information along with description to disclose about their policies, procedures and
achievements. One important aspect that needs to be mentioned here is that both of these
companies have complied with the principles and standards of 3rd edition of the ASX
Corporate Governance Council Principles and Recommendations for the purpose of their
corporate governance requirements (newcrest.com.au, 2019).
Requirement 2
JB HI-FI Limited Newcrest Mining Limited
a. The board size is 7 (jbhifi.com.au, 2019). The board size is 10 (newcrest.com.au,
2019).
b. 6 non-executive directors out of 10;
85.71%.
7 non-executive directors out of 10; 70%.
c. All of the directors are independent
directors; thus, it is 100%.
7 directors are independent directors out of
10; thus, it is 70%.
d. The 2018 Annual report states that the
Chairman and Group Chief Executive
Officer are Greg Richards and Richard
Murray respectively. They have
highlighted that net sales, net profit and
gross profit of the company increased in
2018. At the same time, this year is
crucial for the company as the
management has taken certain important
The Chairman of the company is Peter
Hay. He has highlighted the generation of
positive cash flow by the company in the
whole year which contributed towards the
increased profitability. Improvement in the
net debt position is also evident in the
same year. The balance sheet position of
the firm enhanced due to the
improvements in the market conditions.

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business decisions in this year
(jbhifi.com.au, 2019).
On the overall, 2018 has been a
remarkable year for the company
(newcrest.com.au, 2019).
e. Out of the total 114883372 shares, the
shares of executive directors are
1333919; hence, it is 1.16%.
Out of the total 767742814 shares, the
shares of executive directors are 1100691;
hence, it is 0.14%.
f. There is not any information provided on
block or institutional shareholders in the
year 2018 (jbhifi.com.au, 2019).
Out of 767742814 shares in 2018,
1134002 shares were treasury shares; thus,
it is 0.15% (newcrest.com.au, 2019).
Requirement 3
It can be seen from the above that both JB HI-FI and Newcrest Mining has sufficient
number of non-executive as well as independent directors in their Board and it indicates
towards the presence of objectivity as well as independence in the decision-making process
of these two companies (jbhifi.com.au, 2019). This is a major strength of these two
companies. After that, both of these two companies have provided the information about the
number of shares hold by their executive directors that can be considered as an important
move to establish effective corporate governance within the organizations. It can be said on
the overall basis that both of these two companies have adequately disclosed the required
information about corporate governance (newcrest.com.au, 2019).

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Answer to Part B
Introduction
Corporate Governance is considered as an essential aspect for the success of the
companies and this can be regarded as the combination of certain system, processes and
principles that are majorly helpful to control as well as govern all the activities of the
business so that there is not any chance of fraudulent activities (Claessens & Yurtoglu, 2013).
It can be seen that accounting as well as financial operations are provided with great
importance within the firms and there are many instances all over the world of the accounting
as well as financial frauds within the firms in the absence of effective corporate governance
mechanism (Khan, Muttakin & Siddiqui, 2013). All these aspects indicate towards the need
for the presence of an effective and strong corporate governance system within the
organizations. This essay considers the analysis of different aspects of corporate governance
for the success of the companies.
Discussion
The senior managements of the firms are needed to introduce as well as implement a
strong corporate governance system that will restrict the occurrence of the illegal and
fraudulent activities within the organizations as these activities can lead to the business
failure of liquidation of these companies (Carroll, 2015). Thus, the managements of the
companies are needed to ensure the presence of certain factors. Two of these essential factors
are the presence of sufficient number of external directors in the board and to put a restriction
on the proactive of CEO duality in the firms. The presence of sufficient number of external
directors helps in retaining objectivity as well as independent in the board’s decision-making
process. On the other hand, the dual role of CEO increases the chances of fraudulent
activities and manipulation in the business operations which can lead to corporate failure

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(Carroll, 2015). After that, in order to ensure the correct distribution of the remuneration to
the company directors, it is needed for the companies to ensure the implementation of
effective corporate governance mechanism in the remuneration system of the directors. The
presence of these aspects is necessary for the prevention of corporate failure of the
businesses.
Rules-based approach of corporate governance and Principles-based approach of
corporate governance are two most popular approaches that the firms can adopt for their
corporate governance practice and these approaches can be considered as the alternatives of
each other (Guo, Smallman & Radford, 2013). As per the rules-based approach of corporate
governance, the presence of certain rules and regulations puts the obligation on the firms to
maintain their compliance with the principles and standards of corporate governance on the
compulsory basis. This approach ensures meeting a minimum standard of corporate
governance by the companies. On the other side, as per the principles-based approach, it is
not possible for all the firms to follow a single set of principles and standards of corporate
governance as firms are needed to adopt different corporate governance strategies based on
their unique issues. Hence, a single set of corporate governance regulations is not appropriate
for all the companies as they are needed to consider their different issues (Guo, Smallman &
Radford, 2013).
It is the obligation on the companies listed under ASX to follow certain principles and
standards of corporate governance in accordance with the Australian Securities and
Investment Commission (ASIC) and Corporate Law Economic Reform Program 9 (CLERP
9). Their corporate governance requirements are shown below:
As per the principles of ASIC, companies can use corporate governance as a major
performance driver; and thus, ASIC has articulated their views and ideas on different

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dimensions of corporate governance that consist of the regulations and guidelines that the
companies issue to ensure their compliance with the corporate governance requirements
(Seamer, 2014). These aspects include the information about the responsibilities and
obligations of the company director and other information that are needed for the key
stakeholders to make effective decisions. In addition, ASIC ensures the engagement with the
key stakeholders on regular basis in order to know about the issues related to corporate
governance within the companies. For these purposes, ASIC has introduced and issued
certain principle and standards of corporate governance for the companies on the dimensions
like shareholder engagement, risk management, conflict of interest managements, directors’
oversight, directors’ remuneration and others (Seamer, 2014).
The main purpose to introduce CLERP 9 is to ensure the fact that companies make the
necessary disclosures in corporate governance in order to toughen the financial reporting
framework. CLERP 9 takes into account certain enhanced disclosures on the mattes like
permanent disclosure of the additional corporate governance requirements, alterations in the
aspects like financial reporting and auditing, Management Discussion and Analysis (MD&A),
obligation of licensing for providing financial services, chances in the fundraising
regulations, disclosure about the remuneration of the directors and many others. Hence, it is
clear that both CLERP 9 and ASIC are the crucial regulatory bodies for the ASX listed
companies to develop and maintain a strong corporate governance framework (Beekes,
Brown & Zhang, 2015).
There must be the presence of certain number of independent directors to develop
strong corporate governance mechanism as independent directors have no relation or
connection with the companies that can affect the board’s objectivity and independence.
Independent directors can also be considered as non-executive directors (Bushee, Carter &
Gerakos, 2013). The main responsibility of the independent directors is to improve the

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corporate governance credibility as well as corporate governance standards within the
organizations while managing the business risks effectively. It is on the independent directors
of the companies to establish the necessary committees within the organizations so that
effective corporate governance can ensured. Thus, independent directors can be regarded as
the guides of the companies who are responsible for toughen the corporate governance
mechanism of the firms (Bushee, Carter & Gerakos, 2013).
One essential aspect in corporate governance is ethics due to its role to ensure the
presence of robust corporate governance framework for governing the business operations. It
is needed for the senior managements of the firms to consider both ethics as well as
prosperity at the time to make decisions on the crucial aspects of the businesses. While
following the principles of ethics in corporate governance, it becomes impossible for the
senior executives of the firm to use illegal and unethical means to achieve the organizational
goals and objectives (Davies, 2016). Thus, the compliance with ethics makes sure that the
companies are able to carry out their businesses on long-term basis. Most importantly, the
managements of the companies become able in brining transparency as well as accountability
while following the ethical principles in corporate governance. Hence, it can be said that the
presence of ethics in corporate governance assists in eliminating corruption as well as misuse
of company funds by toughen the overall corporate governance mechanism.
One essential aspect that needs to be mentioned is that a positive connection can be
observed between corporate governance and integrated reporting as the establishment of
corporate governance as a part of integrated reporting has been done to ensure gaining as well
as rebuilding a relation of trust and faith between the company stakeholders and senior
management. It can be observed that the basis of the development of integrated reporting is
the integrated thinking which puts focus on the development of internal processes for
understanding the needs of the key stakeholders. At the same time, the link between the

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financial and non-financial information entrenched in integrated reporting can toughen the
corporate governance by ensuring better decision making, better achievement and better
allocation of the company resources for maintaining long-term sustainability. In addition,
business risks and opportunities can be identified in the presence of integrated reporting in
corporate governance. For these reasons, integrated reporting is regarded as a crucial aspect
in corporate governance (Frias‐Aceituno, Rodriguez‐Ariza & Garcia‐Sanchez, 2013).
It needs to be mentioned that there are many countries all over the world that have
adopted the corporate governance framework for their businesses including Australia, United
States, United Kingdom and others. The main aspect that these countries consider for the
development of corporate governance framework is the issues they are facing. For example,
the interest of the shareholders is provided with prime importance for corporate governance
in the countries like United States and United Kingdom, but other countries of Europe
considers the interest of all the stakeholders for the development of their corporate
governance framework (Bobby Banerjee, 2014).
Conclusion
The above discussion shows that corporate governance has major importance within
the organizations for effectively governing as well as directing the business operations. For
this reason, the prime responsibility of the companies is to follow the principles and standards
of corporate governance that various authorities provide such as ASIC, CLERP 9 and others.
At the same time, the companies are needed to embed both ethical principles as well as
integrated reporting in their corporate governance practices with the aim to restrict illegal
practices like corruption, misuse of funds and others. Effective corporate governance assists
the companies in making better decisions while ensuring correct distribution of resources.

9ACCOUNTING THEORY AND CORPORATE GOVERNANCE
References
Beekes, W., Brown, P., & Zhang, Q. (2015). Corporate governance and the informativeness
of disclosures in A ustralia: a re‐examination. Accounting & Finance, 55(4), 931-963.
Bobby Banerjee, S. (2014). A critical perspective on corporate social responsibility: Towards
a global governance framework. Critical perspectives on international
business, 10(1/2), 84-95.
Bushee, B. J., Carter, M. E., & Gerakos, J. (2013). Institutional investor preferences for
corporate governance mechanisms. Journal of Management Accounting
Research, 26(2), 123-149.
Carroll, C. E. (Ed.). (2015). The handbook of communication and corporate reputation (Vol.
49). John Wiley & Sons.
Claessens, S., & Yurtoglu, B. B. (2013). Corporate governance in emerging markets: A
survey. Emerging markets review, 15, 1-33.
Davies, A. (2016). Best practice in corporate governance: Building reputation and
sustainable success. Routledge.
Frias‐Aceituno, J. V., Rodriguez‐Ariza, L., & Garcia‐Sanchez, I. M. (2013). The role of the
board in the dissemination of integrated corporate social reporting. Corporate social
responsibility and environmental management, 20(4), 219-233.
Guo, L., Smallman, C., & Radford, J. (2013). A critique of corporate governance in
China. International Journal of Law and Management, 55(4), 257-272.
Investors.jbhifi.com.au. (2019). Annual Report 2018. Retrieved 31 January 2019, from
https://investors.jbhifi.com.au/wp-content/uploads/2018/10/Annual-Report-2018-
with-Chairmans-CEOs-Report.pdf

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Khan, A., Muttakin, M. B., & Siddiqui, J. (2013). Corporate governance and corporate social
responsibility disclosures: Evidence from an emerging economy. Journal of business
ethics, 114(2), 207-223.
Newcrest.com.au. (2019). 2018 Annual Report. Retrieved 7 February 2019, from
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1.pdf
Seamer, M. (2014). Does Effective Corporate Governance Facilitate Continuous Market
Disclosure?. Australian Accounting Review, 24(2), 111-126.