Corporate Governance Principles and Risk Assessment: A Case Study of Coca-Cola Amatil

This report examines the ASX Corporate Governance Principles and their implications for Coca-Cola Amatil. It delves into the company's board structure, ethical practices, financial reporting, shareholder rights, risk management, and remuneration policies. The report also conducts a risk assessment, identifying key risks faced by Coca-Cola Amatil and outlining strategies to mitigate them. Through a detailed analysis of the company's financial statements and a discussion of relevant audit procedures, the report provides insights into the importance of corporate governance in ensuring the long-term sustainability and success of a business.

HI6026 - Audit, Assurance and
Compliance
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Executive summary
Corporate governance is the procedure which is required to be performed by all the companies as
by the help of the policies under this it will be possible to establish proper control in the
organization and also directions in relation to operations will be provided in an effective manner.
In this report, corporate governance principles which are set by ASX are to be followed and their
implication in context with Coca-cola Amatil will be discussed in detail. All the principles which
are there as per ASX will be explained in detail so that proper understanding will be obtained.
The risk assessment will also be performed in which all the steps will be included together with
the ratio analysis. The audit risk which is involved together with the procedure to be adopted in
order to reduce it will also be taken into consideration.
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Table of Contents
Executive summary.........................................................................................................................2
ASX Corporate Governance Principles...........................................................................................5
Lay solid foundations for management and oversight.................................................................5
Structure the board to add value..................................................................................................5
Act ethically and responsibly.......................................................................................................6
Safeguard integrity in corporate reporting...................................................................................6
Make timely and balanced disclosure..........................................................................................7
Respect the rights of security holders..........................................................................................7
Recognise and manage risk.........................................................................................................8
Remunerate fairly and responsibly..............................................................................................8
Risk assessment...............................................................................................................................9
References......................................................................................................................................13
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ASX Corporate Governance Principles
Lay solid foundations for management and oversight
In the company, there are certain roles and responsibilities which are to performed by the board
and the management and it is required under this principle that they shall be disclosed in a proper
manner. By this, it will be possible to evaluate and monitor them in an appropriate manner
(Orionequities, 2017). All the agreements shall be maintained in written manner while the
appointment of any director is made.
The implication for Coca-cola Amatil:
In the company, there is the responsibility of the board that they manage the corporate
governance to the highest standards and by that proper conduction of business will be made.
They will work in such manner that risk will be managed in an effective way (Coca-Cola Amatil,
2017). All of the other responsibilities have been specified in the charter made by the company
so that all principles are considered.
Structure the board to add value
The board shall be developed in such size and composition by which all the responsibilities and
duties will be fulfilled in the company. There are various committees which are made of this and
the skills and knowledge of the members are also to be evaluated so that they can perform the
duties properly.
The implication for Coca-cola Amatil:
The board of coca cola Amatil has been composed by considering all the aspects and there is one
executive director who is also the managing director and then two non-executive directors are
there. In addition to the six independent non-executive directors are also included inboard and
they are as follows:
Group managing director: Alison M. Watkins
Chairman: Ilana Atlas
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Non-Executive Director: John Borghetti
Non-executive director: Catherine Brenner
Non-executive director: Julie Coates
Non-executive director: Martin Jansen
Non-executive director: Mark Johnson
Non-executive director: Paul O’Sullivan
Non-executive director: Krishna Kumar Thirumalai
The board shall have such members who will be having proper skills and knowledge and this
will be ensured by Nomination Committee. By this, it will be possible to fulfill all the objectives
of the company together with the legal requirements (Coca-Cola Amatil, 2017). There are
several committees which are framed and they include Audit and finance, people, nomination,
risk and sustainability and related party committee.
Act ethically and responsibly
In the business, it is required that proper code of conduct shall be set by which all the authorities
will be aware of the functions which are to be performed by them so that business can be
improved (Ong & Djajadikerta, 2017). All of them will be performed in such manner that no
harm is made to any of the people who are involved in the business.
The implication for Coca-cola Amatil:
The company has made a code of conduct according to all the set standards and principles which
are there. By that committee is able to analyze that there is no harm which is being made to the
entity as a whole.
Safeguard integrity in corporate reporting
In the business, there are various operations which are to be performed and for that, it is required
that such processes shall be involved by which there will be proper integrity which will be
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maintained. The reporting shall be made in such manner by which safeguarding of interest will
be ensured.
The implication for Coca-cola Amatil:
The company is undertaking a performance evaluation process for all the directors and other
executives and board members. According to it all the policies which are set in respect of the
remuneration are variant for the executive and non-executive directors. All of this is specified in
the corporate statements and due to this the conflicts will not be there and the interest of all is
protected (Coca-Cola Amatil, 2017). All the processes are independent and so integrity is kept
intact.
Make timely and balanced disclosure
This principle states that there shall be proper disclosures which are to be made to the ASX in
respect of all the information. All the announcements shall be firstly be approved by the directors
and then communication shall be made with ASX. All the factors by which impact will be made
shall be informed to ASX on an immediate basis.
The implication for Coca-cola Amatil:
In the company, there is the proper compliance with the principles that are set by the ASX and
for that corporate governance statement has been prepared and that has been filed with the ASX
after that has been approved by the board. With this, the appendix that contains all the details has
also been submitted.
Respect the rights of security holders
According to this principle, the investors shall be provided with all the rights and it shall be
ensured that they are provided with all the information so that they have proper knowledge
which will help in appropriate decisions making. For this relation, the programme shall be
launched so that value of shareholders can be increased and proper communication is established
among them.
The implication for Coca-cola Amatil:
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Coca-cola Amatil is ensuring that this principle is followed and for that, there is a disclosure and
communication policy in the company, according to which all the developments and objectives
of the business shall be informed to the shareholders (Coca-Cola Amatil, 2017). They ensure that
timely communication is made and for that, all the announcements and reports are published. A
media briefing is done and investor relation function is performed.
Recognise and manage risk
The risk is involved in all the business and for that committee is required to be made in this
respect so that compliance with all the legal regulations is made. In this risk assessment and
control is focused for which internal audit can be undertaken.
The implication for Coca-cola Amatil:
In the company, there is the risk and sustainability committee which is established and they
review all the reports which are made by management so that if there is an issue which is there
can be identified and suggestion in relation to them can be made. There are several other
committees which will be considering the matters of risk in detail. There is proper independence
which is made in the company among the internal and external functions and for this manager of
the risk has the right to report to the chairman of the committee in a direct manner.
Remunerate fairly and responsibly
All the employees and authorities are required to be paid the remuneration and this principle
states that there shall be a proper policy which shall be made in this regard so that there is
equality which is established. This will be carried by the committee made for this purpose.
The implication for Coca-cola Amatil:
The remuneration committee has been developed in the company and the policies are also
framed in this respect (Coca-Cola Amatil, 2017). The company has the policy that remuneration
will be different for executives and others and that will be based on the role played by them.
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Risk assessment
Coca-cola Amatil is dealing in the beverages and its aim is to stabilize the earnings which are
made and also to achieve the growth. It has been successful for the years in the partnership in
which production, distribution, and sale of various brands are made. They are related to the coca
cola company which is beneficial for it.
The company is currently operating in the six countries and there is a great report from all of
them. There are around 13000 employees and they are serving up to 270 million of the customers
to whom various brands are provided. In one day there are around 950000 consumers who are
dealing with the company. The main locations include New Zealand, Indonesia, Papua New
Guinea and Fiji.
The business strategy of the company is made in such manner that it focuses on building such
business in which long-term values are developed and by that shareholder's value will also be
maximized (Putra, 2018). They consider the changes that are taking place in the environment and
then they make the changes accordingly so that they can be incorporated in business. They focus
on three components which include performing, grow and strong organization.
There is the audit procedure which is required to be performed so that all the risk which are
involved in the business can be determined and evidence in respect of them can be obtained. The
analytical procedure will be performed by which the reports will be evaluated (Kritzinger &
Barac, 2017). Reliability of the financial statements will be determined and for that ratio analysis
will be performed and under that various ratios will be calculated which are as follows:
Information needed for calculations:
Particulars 201
7(in
$M)
201
6(in
$M)
Current assets 279 310
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9.6 4.8
Current liabilities 183
8.8
184
3.1
working capital 960.
8
126
1.7
Total assets 605
6.9
647
5.3
Retained earnings 262.
5
392.
4
EBIT 678.
4
466.
1
The market value of
equity
188
0.3
227
4.2
Total debt 192
9.5
195
9.5
Sales 493
3.8
507
7.7
Calculation of ratios:
Particulars 2017 2016
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Working capital/Total assets 0.16 0.19
Retained earnings/Total
assets
0.04 0.06
EBIT/Total assets 0.11 0.07
The market value of
equity/Total debt
0.97 1.16
Sales/Total assets 0.81 0.78
In the business, there are various risks which are involved and in terms of audit also there several
such risks. They may be related to material misstatements or errors or frauds which are
committed. They are classified in three parts which are an inherent risk that is incorporated in the
business and then comes the control risk which will be faced due to the loophole in the control
process of the company (Auditinghelp, 2018). The last one is detection risk which is due to the
mistake of the auditor. In this, while performing the audit there is some risk which is not
identified by the auditor and they lie in this. In the current business, there are various risks such
as:
 Cyber risk
 Litigation risk
 Regulatory risk
 Climate change risk
 Business continuity risk
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 Key supplier risk
 Occupational health and safety risk
In order to deal with them there is the need that proper steps shall be taken and they will be
including following:
 The company has made cybersecurity strategy and framework by which all the threats are
identified and addressed.
 The tax audits are performed on the regular basis so that it can be ensured that all the
regulations are complied with by the company in an effective manner.
 Awareness among stakeholders is developed by initiating proper communication so that
they can follow all the policies in a proper manner.
 Tax transparency report is published by which all the information is provided to
stakeholders and government.
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References
 Auditinghelp. (2018). Identifying and Assessing the Risks of Material Misstatement through
Understanding the Entity and Its Environment. Auditinghelp. [Online]. Available at:
https://auditinghelp.com/identifying-and-assessing-the-risks-of-material-misstatement-
through-understanding-the-entity-and-its-environment-13914. [Accessed: 17 April 2018]
 Coca-Cola Amatil. (2017). Annual Report. Coca-Cola Amatil. 78-84. [Online] Available At:
https://www.ccamatil.com/-/media/Cca/Corporate/Files/Annual-Reports/2018/Annual-
Report-2017.ashx [Accessed: 17 April 2018]
 Kritzinger, J., & Barac, K. (2017). The application of analytical procedures in the audit
process: A South African perspective. Southern African Business Review, 21(1), 243-273.
 Ong, T., & Djajadikerta, H. G. (2017). Impact of corporate governance on sustainability
reporting: Empirical study in the Australian resources industry.
 Orionequities. (2017). Corporate governance statement. Orionequities. [Online]. Available
at: http://www.orionequities.com.au/sites/default/files/20171018%20OEQ%20ASX
%20Corporate%20Governance%20Statement%20-%202017.pdf. [Accessed: 17 April 2018]
 Putra, L.D. (2018). The Use Of Analytical Procedures In Auditing. Accounting Financial &
tax. [Online]. Available at: http://accounting-financial-tax.com/2010/04/the-use-of-
analytical-procedures-in-auditing/. [Accessed: 17 April 2018]
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