Importance of ASX Corporate Governance Principles and Risk Assessment Procedures: A Case Study of Wesfarmers Pty Ltd

Audit, Assurance & Compliance

Executive Summary
The present report is undertaken to present a critical analysis of the importance of
Corporate Governance Principles established by the Australian Securities Exchange (ASX) for
strengthening the governance framework within Australian business entities that are listed on
ASX. Also, the report has provided a detail discussion of the risk assessment procedures used by
ASX listed entities for identification and mitigation of the audit risks. In this context, the
company selected is Wesfarmers Pty Ltd listed on ASX and is recognized as supermarket giant
in Australia. It has been illustrated from the analysis of corporate governance statement and risk
assessment procedures of the company that it effectively follows the standard guidelines and thus
is able to create value for all its stakeholders.

Contents
ASX Corporate Governance Principles.........................................................................................................3
Developing Solid Framework for Management and Oversight................................................................3
Board Structure to Add Value..................................................................................................................3
Acting Ethically and Responsibly:............................................................................................................4
Protecting Integrity in Corporate Reporting:...........................................................................................4
Timely and Balanced Disclosure:.............................................................................................................4
Protection of Rights of Security Holders:.................................................................................................5
Risk management....................................................................................................................................5
Fair & Responsible Remuneration...........................................................................................................5
Procedure of risk assessment in case of Wesfarmers..................................................................................5
Balance Sheet Ratio:................................................................................................................................7
Conclusion...................................................................................................................................................8
References...................................................................................................................................................9

ASX Corporate Governance Principles
ASX has developed a set of principle and recommendations regarding the development of
corporate governance framework in the Australian business entities to promote trust and interest
in the business operations. Wesfarmers develops and publishes the corporate governance
statement in accordance with the ASX principles that is examined as follows:
Developing Solid Framework for Management and Oversight
ASX Council has stated the business entities to establish and define the roles ad
responsibilities of the Board and management properly. Wesfarmers Corporate Governance
Statement ahs adequately defined the roles and responsibilities of the Board and management.
The role of Board is to provide a strategic direction to the Group and develop the consecutive
business plans for achieving the long-term goals and objectives. As such, the board aims to
create value for the shareholders by aligning their aims and objective with the overall business
interests. The responsibilities of the Board include monitoring and reviewing the performance of
key management personnel (KMP), identifying the growth opportunities and development of
actions plans for overcoming the gaps in performance. On the other hand, the management role
and responsibility is to manage the daily operational activities of the business adequately and is
directly accountable to the Board. The performance of the board is evaluated by the Nomination
Committee with the assistance of an external consultant on an annual basis. The performance
evaluation of the KMP’s is carried out by the Board at the time of determining the variable
component of their remuneration package on a yearly basis (2017 Corporate Governance
Statement, 2017).
Board Structure to Add Value
Wesfarmers also complies with ASX principle of developing an adequate board structure
comprising of necessary skills, competencies and size to meet the strategic goals of the company.
The corporate governance statement of the company has provided detailed information about the
Board structure and composition. The company places strong focus on appointment of directors
within the Board who can bring an appropriate mix of skills, experience and expertise for
facilitating quick and accurate decision-making. The Board currently comprises of nine directors
out of which eight are non-executive directors having different qualification and expertise. The