Analysis of Accounting Theory and Corporate Governance Report

This report delves into the intricate relationship between accounting theory and corporate governance, offering a comprehensive analysis of corporate governance practices. The report begins with a comparative analysis of Wesfarmers Limited and Boral Limited, evaluating their corporate governance disclosures based on the ASX Corporate Governance Council's principles. It then provides a detailed discussion on the critical roles corporate governance plays in accounting and business practices. The report explores the rules-based and principles-based approaches to corporate governance, highlighting the significance of ASIC and CLERP 9 in the Australian context. Furthermore, it emphasizes the importance of independent directors, ethical standards, and integrated reporting in strengthening corporate governance mechanisms. The report concludes by underscoring the need for continuous improvement and adaptation in corporate governance to ensure long-term sustainability and stakeholder trust. This report provides valuable insights for students seeking to understand the complexities of corporate governance and its impact on accounting practices.

Running head: ACCOUNTING THEORY AND CORPORATE GOVERNANCE
Accounting Theory and Corporate Governance
Name of the Student
Name of the University
Author’s Note

1ACCOUNTING THEORY AND CORPORATE GOVERNANCE
Table of Contents
Answer to Part A........................................................................................................................2
Requirement 1........................................................................................................................2
Requirement 2........................................................................................................................2
Requirement 3........................................................................................................................2
Answer to Part B........................................................................................................................3
References..................................................................................................................................8

2ACCOUNTING THEORY AND CORPORATE GOVERNANCE
Answer to Part A
Requirement 1
Wesfarmers Limited and Boral Limited has ensured the disclosure of their corporate
governance, policies and practices under the Corporate Governance Section in the Annual
Report (wesfarmers.com.au, 2019).
Requirement 2
Wesfarmers Limited Boral Limited
a. 9 Directors 8 Directors
b. 8 out of 9; 88.89% 7 out of 8; 87.5%
c. 8 out of 9; 88.89% 100%
d. Michael Chaney is the Chairman. As per
him, there was decrease in net profit
while operating profit increased. Thus,
Wesfarmers has taken certain decisions
to revive the situation
(wesfarmers.com.au, 2019).
Kathryn Fagg is the Chairman. As per her,
effective performance of business led to
the increase in company profitability.
Boral Limited has engaged with their
stakeholders in an effective manner
(boral.com, 2019).
e. 418000 out of 1133840000; 0.037% 1623442 out of 1172331924; 0.13%
f. No information 27.93%
Requirement 3
As per the above discussion, Wesfarmers Limited and Boral Limited have effectively
disclosed the needed information about the corporate governance indicators in the annual
report. This shows the strong corporate governance practice of these companies. In addition,
both of these two companies have complied with the ASX Corporate Governance Council’s
Principles and Recommendations for their corporate governance practice (boral.com, 2019).

3ACCOUNTING THEORY AND CORPORATE GOVERNANCE
Answer to Part B
Introduction
In today’s business world, companies are giving major importance to the various
aspects of corporate governance due to the fact that the presence of an effective corporate
governance system ensures the governance of the business operations of the companies
(Cheffins, 2013). It implies that in the presence of the necessary adherence with the various
rules and regulations of corporate governance, business organizations become able in
effectively directing as well as controlling the crucial aspects of their business. For this
reason, it is needed for all the companies to ensure the presence of an effective corporate
governance system within their organizations as they can become beneficial from different
angles (ArAs, 2016). The intention of this report is to discuss about the roles that corporate
governance play in the accounting as well as other practices in the companies.
Discussion
In order to ensure the success of the businesses, there must be the needed control and
directions in them which an effective corporate governance system delivers; and the
companies can suffer from corporate collapses in the absence of the same (Bottomley, 2016).
Thus, the principles of corporate governance demand certain commitments from the
companies. First, the probability of corporate collapses increases when the companies do not
have the adequate number of external directors in the Board. It is considered that the internal
directors of the companies often less objective and less independent when taking the business
decisions (Bottomley, 2016). Second, the companies are needed to avoid the twin role of
company CEO that is called the CEO Duality as the two different roles of the same individual
is not good for the company’s success. Third, the companies are needed to ensure the
employment of effective corporate governance in the remuneration of the executives in order

4ACCOUNTING THEORY AND CORPORATE GOVERNANCE
to ensure the distribution of the justified amount of remuneration to the directors as per their
performance (Bottomley, 2016). Thus, the business organizations can avoid corporate failure
by covering these aspects through corporate governance system.
For the implementation of an effective corporate governance system, the companies
are needed to select the appropriate approach while considering the necessary aspects of their
business. Two popular approaches of corporate governance are Rules-based approach and
Principles-based approach of corporate governance (Filatotchev & Nakajima, 2014). Rules-
based approach of corporate governance is developed on the concept that the presence of
certain laws and regulations put the obligation on the firms to ensure the necessary adherence
with the corporate governance principles and the firms must comply with these principles.
This ensures adhering to the minimum requirements of corporate governance by the firms.
However, the principles-based approach of corporate governance is developed on the concept
that the companies are needed to adhere to the different principles of corporate governance as
per their situation as same principles are never adequate for all the companies (Filatotchev &
Nakajima, 2014). This is a famous alternative solution of the rules-based approach of
corporate governance.
There is a strict obligation on the Australian companies to comply with the necessary
principles and standards of corporate governance; and these principles and standards can be
found in the Australian Securities and Investment Commission (ASIC) and CLERP 9. The
roles of these two in corporate governance are discussed below.
ASIC believes that the presence of effective corporate governance can positively
influence firms’ performance. For this, ASIC has taken into account the necessary aspects of
corporate governance with the aim to provide the companies with the required guidelines and
regulations that they must adhere to for ensuring organizations success (Bavoso, 2014). Thus,

5ACCOUNTING THEORY AND CORPORATE GOVERNANCE
the companies are needed to publish information about the responsibilities and obligations of
the directors of the companies and the information about the risk management mechanism
that is majorly useful information for different classes of stakeholders of the companies. In
order to know about the major corporate governance issues that the companies face, ASIC
has taken the initiative to engage with the firms’ stakeholders via meetings and others. For
this reason, ASIC has introduced the necessary regulations and principles of corporate
governance on different aspects like management of conflict, risk management, directors’
remuneration, stakeholder’s engagement and others (Bavoso, 2014).
Same as ASIC, CLERP 9 also plays an important role in the establishment of
effective corporate governance mechanism within the organizations by taking into
consideration certain advanced and additional issues of corporate governance. CLERP 9 is
essential for establishing a connection between corporate governance and financial reporting
of the firms (Faghani, Monem & Ng, 2015). There are certain new and essential requirements
of corporate governance in CLERP 9; they are continuous disclosure of the additional
information related to corporate governance, the changes in the financial reporting and audit
procedures of the firms, the facts of Management Discussion and Analysis, the required
obligation of licensing in the aspect of financial reporting, the required provisions for
fundraising, additional disclosure of directors’ remuneration and others. All these are the
necessary aspects of corporate governance (Faghani, Monem & Ng, 2015).
In order to strengthen the system of corporate governance within the organizations,
the companies are needed to ensure recruiting adequate number of independent directors who
do not have any prior connection with the companies (Ye, 2014). An independent director
can well be regarded as the company’s guide because of their prime role to ensure the
necessary development in the standards and trustworthiness of corporate governance system.
In addition, management of business risks is another major duty of the independent directors.

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It is needed for the independent directors to assess the situation of the companies with the aim
to ensure whether there is need for setting up additional committees or not. Hence, it can be
said in the presence of all these reasons that independent directors are the watchdogs of the
corporate governance that ensures the presence of robust corporate governance mechanism
(Ye, 2014).
The inclusion of the necessary ethical standards in the corporate governance
mechanism is needed for the overall improvements of the businesses. There can be the
development of wariness among the company directors in the application of corporate
governance mechanism and for this reason, all the business decisions need to be taken by
considering ethics and prosperity. One important aspect is that the senior managements of the
companies are not able to use illegal means for achieving the organizational goals and
objectives in the presence of effective ethical standards in corporate governance. For this, the
combination of ethical standards and corporate governance is needed for ensuring long-term
sustainability of the businesses (Boatright, 2017). Moreover, required transparency,
accountability and responsibility can be brought into the businesses by adhering with the
required ethical standards in corporate governance. Illegal draining of funds and corruption
can be demolished from the businesses with the help of ethical corporate governance
practices.
Like ethics, the merger between the corporate governance practices with integrated
reporting is needed for the companies to establish a sense of trust and faith with the key
stakeholders of the business organizations. In addition, it connects the key stakeholders with
the senior management teams of the firms. Integrated thinking is the basis of integrated
reporting and it helps in improving the internal processes of the firms to cater to the needs of
the key stakeholders (Eccles & Serafeim, 2015). At the same time, the corporate governance
practices of the firms can be enhanced in the presence of interacted reporting as it implants

7ACCOUNTING THEORY AND CORPORATE GOVERNANCE
both the financial as well as non-financial information of the business organizations. This
whole aspect contributes towards the better resource allocation, better decisions and better
actions for the companies in order to set up long-term sustainable value. Moreover, the
companies become able in identifying the business opportunities as well as business risks in
the presence of integrated reporting in corporate governance (Eccles & Serafeim, 2015).
Like Australia, there are many other countries all over the world that are adopting the
necessary corporate governance mechanism for ensuring the overall success of their
businesses. Every country considers their issues related to corporate governance while
adopting their corporate governance system. For example, the interest of the shareholders is
the major aspect that the countries like United Kingdom and United States consider in the
corporate governance mechanism, but other countries of Europe and Japan consider the
interest of all the key stakeholders like the suppliers, employees, customers and others for the
development of their corporate governance mechanism. However, for the government of
every country, one common aim behind the establishment of corporate governance
mechanism is to gain the trust and confidence of all classes of stakeholders of the companies
(Young & Thyil, 2014).
Conclusion
It can be seen from the above discussion that the presence of effective corporate
governance system reduces the possibility of corporate failures by ensuring the presence of
adequate number of external directors, independent directors and others. It also shows the
importance of ASIC and CLERP 9 for setting up of the effective corporate governance
system. It also shows that the companies are needed to ensure the merger of ethical
requirements and integrated reporting with corporate governance framework with the aim to
improve the overall efficiency of the companies.

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References
ArAs, G. (2016). A handbook of corporate governance and social responsibility. Routledge.
Bavoso, V. (2014). Explaining financial scandals: corporate governance, structured finance
and the enlightened sovereign control paradigm. Cambridge Scholars Publishing.
Boatright, J. R. (2017). Ethics and corporate governance: Justifying the role of
shareholder. The Blackwell Guide to Business Ethics, 38-60.
Boral.com., (2019). Annual Report 2018. Retrieved 7 February 2019, from
https://www.boral.com/sites/corporate/files/media/field_document/Boral-Annual-
Report-2018.pdf
Bottomley, S. (2016). The constitutional corporation: Rethinking corporate governance.
Routledge.
Cheffins, B. R. (2013). The history of corporate governance. The Oxford handbook of
corporate governance, 46-64.
Eccles, R. G., & Serafeim, G. (2015). Corporate and integrated reporting. Corporate
Stewardship: Achieving Sustainable Effectiveness, 156.
Faghani, M., Monem, R., & Ng, C. (2015). Say on pay regulation and chief executive officer
pay: Evidence from Australia. Corporate Ownership and Control, 12(3), 28-39.
Filatotchev, I., & Nakajima, C. (2014). Corporate governance, responsible managerial
behavior, and corporate social responsibility: Organizational efficiency versus
organizational legitimacy?. Academy of Management Perspectives, 28(3), 289-306.
Wesfarmers.com.au. (2019). Annual Report 2018. Retrieved 31 January 2019, from
https://www.wesfarmers.com.au/docs/default-source/reports/wes18-044-2018-annual-
report.pdf?sfvrsn=4

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Ye, K. (2014). Independent director cash compensation and earnings management. Journal of
Accounting and Public Policy, 33(4), 391-400.
Young, S., & Thyil, V. (2014). Corporate social responsibility and corporate governance:
Role of context in international settings. Journal of Business Ethics, 122(1), 1-24.