Importance of Corporate Governance in Accounting and Financial Accounting

This article discusses the importance of corporate governance in accounting and financial accounting. It covers common themes and findings across four articles, different themes and findings across four articles, managerial implications, and limitations and future research directions. The subject is accounting and financial accounting, and the document type is a research article. The type of assignment is not mentioned. The course code, course name, and college/university are not mentioned.

Running head: APPLIED BUSINESS RESEARCH
APPLIED BUSINESS RESEARCH
Name of the Student
Name of the University
Author Note

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Table of Content
Brief summary of the theory and progression in the field.........................................................2
Common themes/findings across the four articles.....................................................................2
Importance of corporate governance......................................................................................2
Different themes/findings across four articles...........................................................................4
Managerial implications of four articles....................................................................................5
Limitations and Future research direction proposed in four articles..........................................6
References..................................................................................................................................8

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Summary of the theory and progression in the field
It has been identified that corporate governance is highly related to set of rules that
organizations or the businesses apply to run their decisions and back their actions. This
means such set of rules tend to act as the base on the basis of which accountants set and
pursue their objectives within social, legal as well as market environment. Since the basic
function of accounting tasks is to identify and track organization’s financial performance,
these tasks play a crucial role particularly in determining how a firm complies with its
corporate governance policies. Process and practices of accounting are largely effective when
treated as the tool of corporate governance. So, the financial institutions as well as
accountants often make highly effective decisions about how to run and how much money to
invest when accountants have clear set of data. However, accountants must have to comply
with the standards rules set for the corporations. To meet the corporate requirements,
accountants must have certain responsibilities and contributions and those are reviewed in the
following.
Similar themes/findings across the four articles
Importance of corporate governance
Similar themes and findings of four articles is the importance of corporate governance in
accounting and financial accounting. Authors of all of the articles highlighted the fact that
there are certain discrepancies in accounting when following the corporate compliance
standards. For example the article titled as “Behavioural governance, accounting and
corporate governance quality” by Iwu-Egwuonwu (2011) mentions the fact that fraudulent
manipulation of accounts is a significant issue in the present day. According to the authors,
this could usually incorporates the format of inflation of assets or it could omit the liabilities
under the purpose of making the firm appear to be running better than actually it is. So here

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fraudulent activities are sometimes challenging to track and not because it occurs rarely, but
things that perform it often seek to leave no clues for instant detection. All such things take
place as such accountants are trusted as to be performing effectively whose stewardship is not
usually suspected.
Thus, this is a significant example of fraudulent activities in the financial institutions
and it is most quoted on stock exchange who are able to indicate a rosy image which is not
valued by them to make themselves and their respective stock attractive to transparent
investors.. On the other side, the article titled as “Corporate Governance and Its Impact on
the Quality of Accounting Information in the Industrial Community Shareholding
Companies Listed in Amman Financial Market- Jordan” by Al_Sufy et al. (2013) The most
crucial motives for the execution of rules of governance for industrial firms and financial
markets to fulfil the needs of consumers, investors and shareholders and management of
firms in the market due to the inaccuracy of data as well as accounting information.
Conversely, the article as “Corporate governance, accounting and finance: A review” by
Brown, Beekes and Verhoeven, (2011), as per the weight placed by regulators on Corporate
Governance, it is expected to find a positive link between the governance and accounting
quality.
For instance, according to the UK Cadbury report (1992) insisted on the requirement for the
non-executives on board of directors and the existence of audit committee to monitor the
financial reporting quality. Authors of the articles stated the fact that sentiment is
incorporated in many corporate governance codes across the world along with Australian
Stock Exchange principle. So, this indicates that existence of relation between specific
corporate governance characteristics and different forms of accounting quality could be
particularly examined.

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Likewise, in the context of reducing the fraudulent activities in the financial system Ahmed
and Henry (2012) in their article titled as “Accounting conservatism and voluntary
corporate governance mechanisms by Australian firms” organizations should go with the
explanation and use of conservatism in accounting and corporate governance. This is
necessary because accounting conservatism remains as the long-standing as well as pervasive
property of financial reporting rules and practices and this refers to a prudent reaction by
organizations in specially dealing with the uncertainty as well as risk inherent in business
situations.
Different themes/findings across four articles
Behavioural accountability
This theme found in the article -Behavioural governance, accounting and corporate
governance quality” by Iwu-Egwuonwu (2011) is a different one than rest three of the
journal articles selected for the review. Authors claim the fact that good boards appear bad
when directors seem to have lost their core values. So, what needs to be done is to discourage
them from getting off-track by leading them back in the appropriate direction. So, the easiest
way to do is, develop a board running on the appropriate direction always is to establish a
board with behavioural accountability. Major characteristic of effective corporate governance
include accountability, transparency, protection and guarantee of right as well as privilege of
all stakeholders involved in the operation.
Quality of accounting information
This is another highlighted them mentioned in the article Corporate Governance and
Its Impact on the Quality of Accounting Information in the Industrial Community
Shareholding Companies Listed in Amman Financial Market- Jordan” by Al_Sufy et al.
(2013), in which it is found that when understanding the concept and accounting information,

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it is always relevant to evaluate the quality of accounting information. According to the
authors, it is highly significant to determine the cause of such characteristics to help officials
in the development of accounting standards as well as to guide officials in the preparation of
financial statements.
Corporate Governance and firms’ disclosure environment
This theme is also different than the themes found in the article performed by
Corporate governance, accounting and finance: A review” by Brown, Beekes and
Verhoeven, (2011), under this theme, authors have investigated the effect of corporate
governance on firms’ transparency when considered by the outside parties. Authors have
considered the link between corporate governance and firms’ disclosure practices, before
moving on the relationship between corporate governance and analysts. According to the
monitoring rule of corporate governance, it is expected to seek a positive relation between
CG quality and disclosure such as better governance firms often release a wider number of
price sensitive document.
Measures in accounting
This theme is quite unusual in the accounting and corporate governance journal; the
authors their article titled as “Accounting conservatism and voluntary corporate governance
mechanisms by Australian firms” added the fact that accounting conservatism measures
could differ on the basis of the researchers’ definition but the base of it indicates that
organization should take help of the measures when dealing with the standards of corporate
governance. On the basis of the measures, auditors can track the activities of the institutions
that are usually difficult to find out.

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Managerial implications of four articles
It has been identified that all of the articles emphasizes the core principles of
corporate governance in which accountability is a significant stake. One of the articles by
Iwu-Egwuonwu (2011) conclude that accountability is an all-pervading and permeating
concern in the corporate governance and it fundamentally summarizes the requirement for the
faithfulness to the core values of organization with the inclusion of accountability of self and
managerial accountability to greater stakeholders. On the other side, one of the four articles
performed by Al_Sufy et al. (2013) indicates that effective implementation of principles of
corporate governance influence the quality of financial reporting and makes it more proper in
the quality paper.
Moreover, the finding of the articles also state the fact that accountants or the auditors
must have to comply with the relationship between corporate governance principles as well
as the quality of financial reporting. According to the finding of the article, there should be a
proper awareness of designers and users of the financial statements of concept and corporate
governance of the applications in the industrial organizations. Findings of another article state
the fact that probability of an accounting restaurant appears to be related to corporate
governance structure and monitoring practices. Results of the analysis found in the article
also state that there should be a little tighter regulations with respect to fraudulent activities.
For example, there is should be quarterly review of the financial activities done by the
accountants and the auditors in the organization to check on whether ethics of corporate
governance are properly done and implemented. Findings of one of the articles have stated
the fact that existence of both unconditional and conditional conservatism in financial
reporting by sample firms during the analysis period, even though the firms tend to have
become less conservative in corporate practices.

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Constraints and Further research direction proposed in four articles
The major limitation found in the article on “Behavioural governance, accounting
and corporate governance quality” is that this paper has no primary evidences of data, all
sources used in the paper are secondary. Thus, the facts presented in the article regarding
accountants’ contribution to corporate governance require real-world data. Likewise, the
article ‘Corporate Governance and Its Impact on the Quality of Accounting Information in
the Industrial Community Shareholding Companies Listed in Amman Financial Market-
Jordan’ selects organizations in a random order, result found in the study is not specific.
However, the article as corporate governance, accounting and finance talk about the
improvement and supervision in the field of corporate governance in terms of better models,
better empirical proxies and better estimators.

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References
Ahmed, K. and Henry, D., 2012. Accounting conservatism and voluntary corporate
governance mechanisms by Australian firms. Accounting & Finance, 52(3), pp.631-662.
Al_Sufy, F.J., Almbaideen, D.H.I.M., Al_abbadi, H.M. and Makhlouf, M.H., 2013.
Corporate Governance and Its Impact on the Quality of Accounting Information in the
Industrial Community Shareholding Companies Listed in Amman Financial Market-
Jordan. International Journal of Humanities and Social Science, 3(5), pp.184-189.
Brown, P., Beekes, W. and Verhoeven, P., 2011. Corporate governance, accounting and
finance: A review. Accounting & finance, 51(1), pp.96-172.
Iwu-Egwuonwu, R.C., 2011. Behavioral governance, accounting and corporate governance
quality. Journal of Economics and International Finance, 3(1), pp.1-12.