Accounting Theory

This report discusses the strategic errors, accounting practices, and governance issues that led to the collapse of Dick Smith. It provides an overview of the lessons to be learnt from this corporate downfall. The audience for this report includes retail clients, accounting and non-accounting professionals. The report aims to assist in making key decisions and formulating strategies for sound accounting and governance practices.

Running head: ACCOUNTING THEORY
Accounting Theory
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

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Table of Contents
1. Based on scenario:.......................................................................................................................2
a. Purpose of the report:...............................................................................................................2
b. Audience of the report:............................................................................................................2
c. Key decisions to be made:.......................................................................................................2
d. Information required for undertaking decisions:.....................................................................3
e. Keywords:................................................................................................................................3
2. Ten sources relevant to the project:.............................................................................................3
3. Source analysis:...........................................................................................................................3
4. Plan of the report:........................................................................................................................8
References:....................................................................................................................................10

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1. Based on scenario:
a. Purpose of the report:
The report would be prepared with the intent to find out the strategic errors made by Dick
Smith that eventually led to the collapse of the organisation. The other issues like accounting
practices and governance issues have been discussed as well. Finally, the report has provided
overview of the lessons to be learnt from the collapse of Dick Smith.
b. Audience of the report:
From the provided information, it has been identified that there are several retail clients
interested in knowing about the reasons behind the corporate downfall of Dick Smith Holdings
Private Limited. Therefore, the manager of the accounting firm has assigned the responsibility of
preparing a draft report on the corporate downfall of Dick Smith. The audience for this report
would be the retail clients along with accounting and non-accounting professionals. The non-
accounting professionals mainly include shareholders, investors, suppliers, debtors and the
community.
c. Key decisions to be made:
By analysing the reasons behind the corporate failure of Dick Smith Holdings Private
Limited, it becomes possible to understand the factors that could eventually lead to such decline.
The decisions to be made including undertaking certain aspects to be included in the strategic
management process along with ensuring sound accounting and governance practices for the
organisation to avoid any future crisis like Dick Smith.

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d. Information required for undertaking decisions:
For undertaking the above-stated decisions, it is necessary to obtain the available
information on online sources regarding the corporate collapse of Dick Smith Holdings Private
Limited. This information mainly includes the strategic management process of the organisation
along with issues related to its corporate governance and accounting practices. By collecting the
above information, it would be possible to formulate strategies that would assist in undertaking
precautionary measures for the business organisations operating in Australia.
e. Keywords:
For carrying out this report, the keywords to be searched include Dick Smith Holdings
Private Limited, corporate governance, accounting standards in Australia and strategic
management.
2. Ten sources relevant to the project:
The ten sources, which are deemed to be relevant to the project, are included in the
“References” section.
3. Source analysis:
Source 1:
Full citation of resource:
Carnegie, G.D. and O’Connell, B.T., 2014. A longitudinal study of the interplay of corporate
collapse, accounting failure and governance change in Australia: Early 1890s to early
2000s. Critical Perspectives on Accounting, 25(6), pp.446-468.
Author’s credentials:

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Garry D. Carnegie is a professor of Accounting and Head School of Accounting at RMIT
University in Australia. The individual has completed his Bachelor of Commerce and Master of
Commerce from Deakin University and Doctor of Philosophy from the Flinders University of
South Australia. Brendan O’Connell is employed as a professor of Accounting and Head School
of Accounting at RMIT University in Australia. The individual has been the chief examiner of
the CPA program in Australia, in which he has been engaged highly in redesigning the program
as well as the development of comprehensive materials.
Author’s intended audience:
The journal article is intended for the readers that include the managers, creditors, investors,
shareholders, suppliers, customers and the overall global community by using Australian
evidences.
Author’s main arguments/main ideas:
For conducting this research, the researchers have adopted investigatory framework constituting
of a combination of complementary perspectives. This framework has emphasised on
governance, accounting and legal perspectives. From the research findings, it has been analysed
that the accountants, particularly the external auditors and the profession of accounting have
been implicated on all rounds of Australian corporate collapses ranging from early 1890s to early
2000s. The accounting failure has been associated readily with unexpected corporate downfall
and this has been perceived often in the form of a determinant of sudden downfalls during the
crises. Moreover, there has been misleading financial reporting and ineffective tax rules that
eventually resulted in corporate collapses in Australia.
Evidence provided to support the argument/idea:

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The lack of auditor independence has been identified as a significant matter of concern, as
evidences have been found where they are not fully independent of the management of the
clients. In addition, there have been certain loopholes in the Australian legal system, which have
been used by the organisations ultimately leading to their collapses.
Questions raised from the source, if any or connection with other sources:
The research related to corporate collapse, governance change and accounting failure might carry
on to privilege a form over the substance approach to financial reporting by the organisations
with minimum potentially unfavourable implications for quality and dependability of the
financial statements and auditor certification value. This might raise questions on the
conceptions of contemporary auditing and accounting.
Conclusion (overall value in the resource and use in the report):
By using this research paper, it would be possible to relate the accounting and governance issues
with those of Dick Smith Holdings Private Limited. Therefore, the increased accounting
regulation might fuel the falsified expectations of the value of audited financial reports.
Source 2:
Full citation of resource:
Abid, G. and Ahmed, A., 2014. Failing in corporate governance and warning signs of a corporate
collapse. Pakistan Journal of Commerce and Social Sciences, 8(3), pp.846-866.
Author’s credentials:
Ghulam Abid is currently employed in National College of Business Administration and
Economics in Lahore, Pakistan and Alia Ahmed is working as an Assistant Professor in National

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College of Business Administration and Economics in Lahore, Pakistan as well.
Author’s intended audience:
The research paper is intended for the readers that include the managers, creditors, investors,
shareholders, suppliers, customers and the overall global community by using Australian
evidences.
Author’s main arguments/main ideas:
The researchers have emphasised on the failures of corporate governance and warning signs of
corporate collapse. The authors have found that USA has been the nation, which has witnessed
highest number of corporate frauds over the period between 1990 and 2014. In majority of the
cases, it has been found that the Chief Executive Officers (CEOs) and Chief Financial Officers
(CFOs) have been responsible behind the global corporate collapses.
Evidence provided to support the argument/idea:
From the secondary data gathered, the researchers have identified that in 83% of the cases, the
CEOs were accountable behind the downfall of their organisations and the figure is 72% for
CEOs. It has been identified that the accused parties have faced either criminal charges or
monetary penalties.
Questions raised from the source, if any or connection with other sources:
The speedy and aggressive growth as well as expansion of any organisation has been found to be
a warning signal, which the shareholders have to investigate sceptically before undertaking
investment decisions.
Conclusion (overall value in the resource and use in the report):
This research would be crucial for the report, as it would assist in analysing the role of the
management policies of Dick Smith that eventually led to its decline.

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Source 3:
Full citation of resource:
Shamsabadi, H.A., Min, B.S. and Chung, R., 2016. Corporate governance and dividend strategy:
lessons from Australia. International Journal of Managerial Finance, 12(5), pp.583-610.
Author’s credentials:
Hussein Abedi Shamsabadi is a professor in Department of Accounting, Finance and Economics
at Griffith University in Australia. Both Byung-Seong Min and Richard Churg are employed as
Professors in Department of Accounting, Finance and Economics at Griffith University in
Australia.
Author’s intended audience:
The journal article is intended for the readers that include the managers, creditors, investors,
shareholders, suppliers, customers and the overall global community by using Australian
evidences.
Author’s main arguments/main ideas:
The research paper has investigated the relationship between dividend policy and corporate
governance in Australia. Moreover, it has concentrated on various types of payouts of the
organisations listed in the Australian securities market. From the research findings, it has been
evaluated that improved corporate governance assists in efficient allocation of resources.
Thirdly, the researchers have stated that it is not certain that the franked dividends motivate the
investors to expect additional dividend payments in comparison to the optimum payout levels
indicated by agency theory. Therefore, sound corporate governance assists in maintaining

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effective business growth.
Evidence provided to support the argument/idea:
With the help of effective sound corporate governance, it becomes possible for the business
organisations to minimise wastage of free cash flows. On the other hand, the uncertain effect of
franked dividends is not a clear motivation for other types of dividend such as dividend
reinvestment plans and repurchase of shares. However, the thesis findings support the favourable
impact of franked dividends on dividend policy.
Questions raised from the source, if any or connection with other sources:
This research paper has provide implications for payout policy at the organisational level along
with the policy of the government, since the Australian government needs to strengthen the code
of corporate governance for providing protection to the minority shareholders.
Conclusion (overall value in the resource and use in the report):
This thesis paper could be used in the report for setting a base of corporate governance policies,
as Dick Smith collapsed owing to governance issues as well. Hence, this paper would assist in
learning suitable lessons about corporate governance.
4. Plan of the report:
The report would start with an introduction section followed by a discussion section and a
conclusion. The discussion section would include the following sub-headings:
1. Overview of Dick Smith
2. Strategic errors leading to the collapse of Dick Smith

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3. Accounting practices of the organisation
4. Governance issues accountable for the failure of the organisation
5. Lessons learnt from the downfall of Dick Smith

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References:
Abid, G. and Ahmed, A., 2014. Failing in corporate governance and warning signs of a corporate
collapse. Pakistan Journal of Commerce and Social Sciences, 8(3), pp.846-866.
Alexander, D., De Brébisson, H., Circa, C., Eberhartinger, E., Fasiello, R., Grottke, M. and
Krasodomska, J., 2018. Philosophy of language and accounting. Accounting, Auditing &
Accountability Journal, 31(7), pp.1957-1980.
Bhasin, M.L., 2016. Survey of Creative Accounting Practices: An Empirical Study. Wulfenia
Journal KLAGENFURT, 23(1), pp.143-162.
Brooks, C. and Oikonomou, I., 2017. Forthcoming, British Accounting Review 2018.
Bryan, D., Rafferty, M. and Wigan, D., 2017. Capital unchained: finance, intangible assets and
the double life of capital in the offshore world. Review of International Political Economy, 24(1),
pp.56-86.
Buckby, S., Gallery, G. and Ma, J., 2015. An analysis of risk management disclosures:
Australian evidence. Managerial Auditing Journal, 30(8/9), pp.812-869.
Carnegie, G.D. and O’Connell, B.T., 2014. A longitudinal study of the interplay of corporate
collapse, accounting failure and governance change in Australia: Early 1890s to early
2000s. Critical Perspectives on Accounting, 25(6), pp.446-468.
Chircop, J. and Novotny-Farkas, Z., 2016. The economic consequences of extending the use of
fair value accounting in regulatory capital calculations. Journal of Accounting and
Economics, 62(2-3), pp.183-203.

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Darrat, M.A., Wilcox, G.B., Funches, V. and Darrat, M.A., 2016. Toward an understanding of
causality between advertising and sales: New evidence from a multivariate cointegrated
system. Journal of Advertising, 45(1), pp.62-71.
Shamsabadi, H.A., Min, B.S. and Chung, R., 2016. Corporate governance and dividend strategy:
lessons from Australia. International Journal of Managerial Finance, 12(5), pp.583-610.