Corporate Governance in Accounting

This paper analyzes the corporate governance strategies, policies, and practices of Woolworths Ltd. and Wesfarmers Ltd. using their annual reports. It also compares the corporate governance indicators of both firms to discuss their effectiveness and adequacy.

Running head: CORPORATE GOVERNANCE IN ACCOUNTING
CORPORATE GOVERNANCE IN ACCOUNTING
Name of the Student:
Name of the University:
Author Note

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Table of Contents
Part A. Case Study.....................................................................................................................2
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
Corporate Governance...........................................................................................................2
Corporate Governance Indicators..........................................................................................2
Comparison............................................................................................................................4
Conclusion..................................................................................................................................4

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Part A. Case Study
Introduction
This part of the paper is paper is prepared to analyse the corporate governance
strategies, policies and practices of the chosen companies named Woolworths Ltd. and the
Wesfarmers Ltd. This paper uses the annual report of both the companies to analyse the
corporate governance information of each company. This part of the paper also consider the
various corporate governance indicators of both the companies. Lastly, this report compare
the corporate governance indicators of both the firm to discuss the effectiveness, strength and
adequacy of corporate governance adopted by both firms.
Discussion
Corporate Governance
The annual report of Woolworths Limited for the year 2018 disclose that the
Woolworths Group follows the each recommendation of the ASX Corporate Governance
Council’s Corporate Governance Principles and the recommendations. Mainly the firm
follows the principles, policies and recommendations of the ASX Corporate Governance and
according make their strategies and practices their strategies.
While, the corporate governance policy of the Wesfarmers Ltd states that the
company fulfils the obligation and responsibilities in the best interests of the company and its
stakeholders. Same like the Woolworths Limited, Wesfarmers also follows all the principles
and recommendations of the ASX Corporate Governance Council.
Corporate Governance Indicators
a) Total Number of director: - The Wesfarmers Ltd have 10 directors in its
board in total. While, the Woolworths Ltd. have total 8 directors in its board.

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b) Non- Executive director: - The Woolworths have 7 director as non-
executive director hence, the percentage of the non- executive director is 87.5
%. On other hand, the Wesfarmers have 9 non- executive directors hence, the
percentage of non- executive directors is 90%.
c) Independent Directors: - The Woolworth have 6 independent directors, the
percentage of the independent directors is 75 %. Other side, the annual report
of Wesfarmers of 2018 does not have any information of independent
directors.
d) Chairman’s detail: - The chairman of Woolworth Ltd is Gordon Cairns. The
statement of the chairman in the annual report of 2018 shows that the
chairman of the company is mainly focused in innovation, community and
shareholder values. The chairman stated that the last year the company was
focused in the strategy, culture and capital management and made good
progress and this year company is looking forward to increase its efficiency in
innovation, community and the shareholder value (Woolworthsgroup 2019).
While, the Michael Chaney AO, the chairman of Wesfarmers ltd,
stated in their massage for the annual report of 2018, that in this year company
took the some difficult but important decision regarding the long term
shareholders return. In overall, the chairman discussed about the some major
changes made by the firm and details of their performance in the year 2015
(Wesfarmers 2019).
e) Share hold by executive directors: - The executive directors of Wesfarmers
Ltd. holds the total number of 607,171 share at the end of the financial year
2018. The executive directors of the Woolworths Ltd. holds the 942,147 share
of the company.

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f) Share hold by industrial investors: - The block holders and the institutional
investors holds the 53.62 % of the total share of Wesfarmers Ltd. While, the in
the Woolworth Ltd the percentage of total share held by the industrial
investors is 59.13 %.
Comparison
Both the companies have a good corporate governance policy and follows the
principle and recommendation of the ASX Corporate Governance. The Woolworth has less
number of director compared to Wesfarmers but the Woolworths have more number of
executive and independent director in their board. The both the companies have the
effectiveness in their board. The board of director of both the firm is also strong enough to be
the market leader in their industry.
Conclusion
This part of the paper concluded that the corporate governance is must require to be
perfect for the performance and efficiency of the firm. Here, the both firm follows the ASX
Corporate Governance principles and the recommendation to properly structure their board of
directors. The indicators of the corporate governance indicates that the corporate governance
practices and principles adopted by the firm is strong and adequacy.

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Part B. Essay
This part is an essay on the Corporate Governance. This essay is prepared to analyse
the role of the corporate governance in accounting. This essay demonstrate a wide range of
aspects of corporate governance including practices in relation to corporate failure,
approaches to corporate governance, roles of ASIC and CLERP 9 in Australia, independent
director, ethics and integrated reporting and its reflection of international perspectives and
developments. The main objective of this essay is to provide the entire concept and the details
of the Corporate Governance.
Role of Corporate Governance in accounting
The corporate governance depends on three factors, named subject area, industry and
the environment. The corporate governance is applicable in many fields such as economic,
law, finance, management, accounting, sociology and political science. In the context of the
company, reporting the corporate governance is the set of principle and the roles by which the
corporation are controlled and operated (Tricker and Tricker 2015). This helps to identify the
distribution of the rights and responsibilities among different members of the corporation. In
simple words, the corporate governance provides the rule, principle and the recommendation
to the company regarding the structures of their board of the directors. The board of director
is a committee that control the management of the firm (Lama and Anderson 2015). Hence,
the corporate governance provides the rule of the distribution of the rights among the board
of directors. The followings are the some important role of corporate governance: -
 To maintain the structure of the board: - The main function of the corporate
governance is to maintain the proper structure of the board of directors of the
company by providing the various rules, principle and recommendations.

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 Director appointment: - The corporate governance set the procedure for
appointing the director for the company. The corporate governance provides the
principle and rule regarding the appointment of the directors in the company to
ensure the fair appointment of the directors.
 Director’s duties and remuneration: - The corporate governance is also liable to
define the duties of the directors of the firm also ensure that they must perform
their duties properly (Lama and Anderson 2015). It also determines the
remuneration for the directors of the company.
 Internal control: - The corporate governance ensure that the board of director
must perform the proper and positive internal control to manage the business risk of
the company.
 Audit: - The corporate governance also provides the guideline for the auditing of
the firm. This also ensure that the audit function of the firm must be performed
fairly.
Corporate governance practices in relation to corporate failure
The corporate failure does not happen over the night. The corporate failure provides
several sign before the failure. The management must notice those sign to avoid the corporate
failure (Hay, Stewart and Botica Redmayne 2017). The following are the some major issued
face by the company in relation to the corporate governance that leads the firm to the
corporate failure: -
 The ineffective governance mechanism of the corporate governance leads the
company towards the corporate failure. Here, the ineffective governance means the
lack of the board committee and less number of member in corporate governance.

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 The non- independent board and the audit committee also lead the company to
corporate failure. For example, the CEO of the firm fulfils multiple roles in various
committees.
 Management of the company who undertakes the various governance structures role
to manage the risk of the firm. If the management fail to perform their duties properly
than it also leads the firm to the failure.
 The inadequately qualified members of the board, who does not have the proper
knowledge in their relative field can also leads the firm to the corporate failure.
Approaches to Corporate Governance
The corporate governance have the following approaches in this respect of the
company: -
 Audit Approach: - The corporate governance determines that the, which company
will adopt the local auditing procedure to perform their audit and which company use
the international process of audit in respect of their business (Artiach, Gallery and
Pick 2018). In short, this approach of the corporate governance determine the
appropriate auditing principle for the companies to adopt in their auditing function.
 Balance of Power Approach: - In this approach, the corporate governance distributes
the role, function, obligation and power among the member of the boards, managers,
directors and other important members of the firm.
 Leadership Approach: - The corporate governance also provides the guidelines for
the leadership practices in the company. As the leadership is not a scientific discipline
hence, the firm must perform the leadership function in a proper and positive manner.
Roles of ASIC

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The ASIC is stand for the Australian Securities and Investment Commission. This is
an independent Australian government body, which act as corporate regulatory of Australia.
The ASIC perform the several roles regarding the various areas of responsibility (Kuan
2015).
The main role of the AISC is to set the various rules and regulation for the corporate
governance, financial services, securities and derivatives, insurance, consumer protection and
financial literacy and various other institutions. By providing the role and regulation for the
above- mentioned areas the AISC ensures that the all the function and the performance of the
organisations are must be performed fairly without performing any frauds. The role of the
AISC is also to control the business function of all the above- mentioned organisations.
Roles of CLERP 9
The CLERP 9 is set of rules and the principle for the auditors of the Australia. The
CLERP 9 introduced the significant changes into the regulation of corporate governance in
Australia (Riaz and Kirkbride 2017). The CLERP 9 provide the new rules regarding the
auditor’s qualification and the independency for the ASX listed companies. The followings
are the main function of the CLERP 9: -
 To provide the new and effective rule for the qualification of the auditor responsible
for the audit of the ASX listed company of Australia.
 To set the norms for the external auditor of the ASX listed companies regarding their
independency.
Independent Directors
The independent director is a non- executive director of the firm, who helps the
company to improving corporate credibility of the company and the governance standards
without having any interest in the profitability of the firm.

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Ethics and integrated reporting
The ethics and integrated reporting ensures the trueness and the fairness in reporting
the information of the company to its stakeholders. The information published by the firm in
the annual must show the true balance and information about the company to the readers, is
the main objective of ethics and integrated reporting.
International development
The proper corporate governance help the company to develop their business as well
as increase the efficiency of the firm. Hence, the corporate governance is must required for
the development of the company. Same like the business development the corporate
governance also provides various principle for the companies which also help the company to
develop internationally.
This paper concludes that the corporate governance is the set of rules and principle,
which divides the right and the function among the members of the board, management and
directors of the firm. This perform the various role in the development of the firm by
providing guidelines and principle to the companies. The improper corporate governance also
become the reason of the corporate failure.

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References and bibliography
Artiach, T.C., Gallery, G. and Pick, K.J., 2018. A chronological review of the Australian
litigation risk environment surrounding IPO earnings forecasts. Pacific Accounting
Review, 30(2), pp.168-186.
Hay, D., Stewart, J. and Botica Redmayne, N., 2017. The role of auditing in corporate
governance in Australia and New Zealand: a research synthesis. Australian Accounting
Review, 27(4), pp.457-479.
Kuan, K., 2015. Why private interest theory should be used to evaluate the adequacy of the
auditor independence requirements in CLERP 9.
Lama, T. and Anderson, W.W., 2015. Company characteristics and compliance with ASX
corporate governance principles. Pacific Accounting Review, 27(3), pp.373-392.
Mees, B. and Smith, S.A., 2019. Corporate governance reform in Australia: a new
institutional approach. British Journal of Management, 30(1), pp.75-89.
Riaz, Z. and Kirkbride, J., 2017. Governance of director and executive remuneration in
leading firms of Australia. Economics and Business Review, 3(4), pp.66-86.
Tricker, R.B. and Tricker, R.I., 2015. Corporate governance: Principles, policies, and
practices. Oxford University Press, USA.
Wesfarmers 2019. [online] Wesfarmers.com.au. Available at:
https://www.wesfarmers.com.au/docs/default-source/asx-announcements/2018-annual-
report.pdf?sfvrsn=0 [Accessed 31 May 2019].
Woolworthsgroup 2019. [online] Woolworthsgroup.com.au. Available at:
https://www.woolworthsgroup.com.au/icms_docs/195396_annual-report-2018.pdf [Accessed
31 May 2019].