Accounting Theory and Corporate Governance: Financial Report Review

This report provides a comprehensive analysis of accounting theory and corporate governance, focusing on the annual reports of two companies listed on the Australian Stock Exchange (ASX): Boral Limited and Newcrest Mining. The report is divided into two parts. Part A examines the corporate governance practices of the two companies based on their 2018 annual reports, covering aspects such as board composition, independence, and the chairman's statements. It highlights key corporate governance indicators like board size, non-executive director percentages, and executive shareholdings. Part B delves into the theoretical underpinnings of corporate governance, discussing its significance in preventing corporate failures and the adoption of rules-based versus principles-based approaches. The report also explores the roles of regulatory bodies like ASIC and CLERP 9 in shaping corporate governance in Australia. Furthermore, it emphasizes the importance of independent directors, ethical principles, and integrated reporting in strengthening corporate governance frameworks. The report concludes by highlighting the global relevance of corporate governance and its impact on financial reporting and stakeholder trust.

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

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Table of Contents
Part A.........................................................................................................................................2
Requirement 1........................................................................................................................2
Requirement 2........................................................................................................................2
Requirement 3........................................................................................................................3
Part B..........................................................................................................................................4
References................................................................................................................................10

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Part A
Requirement 1
It can be seen from the 2018 Annual Report of Boral Limited and Newcrest Mining
that both of these companies have adopted a descriptive approach for disclosing the
information of their corporate governance activities. It needs to be mentioned that both of
these two companies have disclosed the corporate governance related information on the
aspects like the responsibility of the board of directors, risk management, executive
remuneration and others. At the same time, it needs to be mentioned that both of these
companies have adopted the ASX Corporate Governance Principles with the aim to disclose
the information related to corporate governance (boral.com 2019).
Requirement 2
a. The board size of Boral Limited is 8 and the board size of Newcrest Mining is 10.
b. Boral Limited has 7 non-executive directors and the percentage of non-executive
director is 87.5 (boral.com 2019). Newcrest Mining has 7 non-executive directors and
the percentage of non-executive director is 70% (newcrest.com.au 2019).
c. All the directors of Boral Limited are independent that represents 100%. In case of
Newcrest Mining, 7 directors are independent that comprises 70% (newcrest.com.au
2019).
d. Kathryn Fagg is the Chairman of Boral Limited. As per the summary of her statement,
the company has registered a 47% increase in the net profit after tax before
amortization and significant items. The impressive business performance of the
company throughout the year is the major reason for this growth. In addition, there
has been a major increase in the safety performance of the board. In addition, the

3ACCOUNTING THEORY AND CORPORATE GOVERNANCE
company has also been able in engaging with the shareholders in an effective manner
(boral.com 2019).
Peter Hay is the Chairman of Newcrest Mining. As per his statement, the company
has been able in generating positive cash flows throughout the year along with the
increase in company’s profitability. In addition, net debt position of the company has
also improved in the same year. The capital requirements and improved market
condition leads to the improved balance sheet position of the company. On the overall
basis, the performance of Newcrest Mining has improved in the year 2018
(newcrest.com.au 2019).
e. The executive directors of Boral Limited hold 1623442 shares out of 1172331924
shares in 2018 and the percentage is 0.13% (boral.com 2019). The executive directors
of Newcrest Mining hold 1100691 shares out of 767742814 shares in 2018 and the
percentage is 0.14%.
f. In Boral Limited, the block and institutional shareholders owned 27.93% of shares. In
Newcrest Mining, the block 0.078% of shares.
Requirement 3
It can be seen from the 2018 Annual Report of Boral Limited and Newcrest Mining
that both the companies have used almost the same corporate governance indictors for their
business; they are responsibilities of the board, remuneration report, risk management
committee, audit committee and others. Boral Limited has adopted the principles like
integrity, excellence and endurance for the purpose of corporate reporting (boral.com 2019).
It implies that both of these companies have been able in disclosing information about the
main corporate governance related areas of their business.

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Part B
Introduction
Corporate Governance is an essential factor for the business organizations to gain the
trust as well as faith of the key stakeholders as the presence of effective corporate governance
mechanism assists the senior managements of the companies to govern all of their business
activities (Tricker and Tricker 2015). For this reason, the components of an effective
corporate governance framework are certain systems, principles and processes that assist the
managers in attaining the organizational goals and objectives. There are many instances all
over the world where the companies had to face collapse or liquidation due to the presence of
frauds and manipulations in the business activities and the presence of ineffective corporate
governance can be observed behind each of the cases (Edmans 2014). For this reason, this
essay takes an honest attempt to shed lights on the essential role of corporate governance in
accounting of the companies.
Discussion
Corporate governance has certain major significance in the business organizations as
the companies can face collapse or liquidation in the absence of the same. For this reason, the
firms are needed to ensure the presence of sufficient number of outside or external directors
in the board with the aim to avoid the corporate failure in the presence of the belief that there
can be less objectivity in the actions of internal directors that can affect the independent
decision-making process of the firms (Bain and Band 2016). At the same time, the companies
are needed to restrict the practice of CEO duality as the dual role of the CEO can increase the
chances of organizational frauds. After that, the companies are needed to employ effective
corporate governance policies in the executive remuneration as the presence of this ensures
that the directors receive the justified amount of remuneration as per their performance. All

5ACCOUNTING THEORY AND CORPORATE GOVERNANCE
these show that the implementation of effective corporate governance framework can prevent
the corporate failures of the companies (Berger, Imbierowicz and Rauch 2016).
Business organizations have the option to select between two specific approaches of
corporate governance; these approaches are Rules-based approach and Principles-based
approach. It can be seen in the rules-based approach of corporate governance that the
companies have the obligation to follow the principles and standards of corporate governance
in the presence of certain rules and these rules do not provide any chance to the companies to
ignore the principles of corporate governance. Thus, it becomes the mandatory requirements
of the companies to ensure maintenance of the minimum corporate governance standards
(García‐Castro, Aguilera and Ariño 2013). At the same time, one major alternative of the
rules-based approach is the principles-based approach of corporate governance. It can be seen
under the principles-based corporate governance approach that a single set of principles of
corporate governance cannot be sufficient for the companies as the companies have to face
different corporate governance related issues. Thus, these corporate governance issues are the
main determinants of the corporate governance frameworks for the companies (Devinney,
Schwalbach and Williams 2013).
The presence of the Australian Securities and Investment Commission (ASIC) and
Corporate Law Economic Reform Program 9 (CLERP 9) can be seen which provides the
Australian companies with certain regulations and standards that need to be followed in the
corporate governance frameworks.
ASIC: ASIC believes that performance of the companies can be positively influenced with an
effective corporate governance framework and thus, it takes into consideration the different
aspects of corporate governance for the companies that consist of the guiding principles and
regulations (Salim, Arjomandi and Seufert 2016). As per ASIC, it is necessary for the

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companies in Australian to adhere to the requirements of corporate governance with the aim
to ensure effective performance. For the success of this purpose, the obligation on the
companies is to ensure the disclosure of the necessary information about the aspects like roles
and responsibilities of the directors, remuneration framework, risk management framework
and others (Salim, Arjomandi and Seufert 2016). Moreover, ASIC have taken the initiative to
know about the corporate governance related issued inside the organizations by engaging
with the key stakeholders.
CLERP 9: The role of CLERP 9 is almost the same with the role of ASIC as it demands the
commitment of the companies in disclosing certain additional information related to
corporate governance. As per CLERP 9, the areas that need increased disclosure from the
companies are the alterations in the processes of financial reporting, audit procedures,
Management Discussion and Analysis, obligation for business licensing for the financial
services, managements of conflict of interest, and changes in the fundraising provision,
executive remuneration and participation of the shareholders. All these increased disclosures
can ensure the betterment of the corporate governance reporting of the firms (Young and
Thyil 2014).
With the aim to establish effective corporate governance frameworks, the business
organizations must ensure the presence of independent directors in the board. Independent
directors are regarded as non-executive directors who have no relation with the company that
reduces the possibility of affecting independent judgements (Al-Janadi, Rahman and Omar
2013). The main role of the independent directors is to bring perfection in corporate
governance standards and corporate governance credibility and it makes them the guide of
the companies. Moreover, it is the responsibility of the independent directors to ensure the
establishment of the needed committed to govern various activities of the businesses. In the

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presence of all these roles of independent directors in corporate governance, they can well be
considered as the corporate watchdog.
It is the utmost priority of the companies to ensure the adherence with the necessary
ethical principles to strengthen corporate governance. The executive committee of the
companies must consider ethics as well as prosperity for making crucial decisions related to
corporate governance (Boatright 2017). In the presence of the effective ethical corporate
governance, it becomes difficult for the executive managements of the companies to use
unethical means for achieving the goals and objectives and it can ensure the long-term
sustainability of the businesses. Apart from this, it is possible for the managements of the
companies to set up accountability, responsibility and transparency within the operations of
the companies in the presence of effective compliance with ethics. Strong corporate
governance framework in the presence of ethical compliance can restrict the occurrence of
organizational corruption and misuse of funds (Davies 2016).
The collaboration of corporate governance framework with integrated reporting
framework can be done in the presence of a positive relation between these two aspects; the
aim behind the introduction of integrated reporting is to gain the trust of the key stakeholders
so that a cordial relation can be developed between the key stakeholders and senior
management (Frias‐Aceituno, Rodriguez‐Ariza and Garcia‐Sanchez 2013). Integrated
reporting is based on integrated thinking which stresses on the success of the internal
processes for understanding the key stakeholders’ needs. Integrated reporting develops a
connection between financial and non-financial information in the process of corporate
governance; and the outcomes of these are effective decision-making, better corporate action,
and effective allocation of organizational resources and to retain the long-term value
development. Moreover, integrated reporting plays a crucial role to identify the business risks
and opportunities of the companies (Eccles and Serafeim 2015). Thus, the executive

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management must consider the introduction of integrated reporting to employ an effective
corporate governance framework.
From the international perspective, corporate governance plays a crucial role for the
countries all over the world as many other countries have adopted the corporate governance
framework for their overall business success and these countries adopt the corporate
governance framework to resolve their unique issues related to corporate governance (Said
Mokhtar and Mellett 2013). For example, the countries like United Kingdom and United
States of America stress on the interest of the key stakeholders for the development of
corporate governance framework, but certain other countries in Europe along with Japan
consider additional parties for corporate governance framework such as public, employees,
suppliers and others. However, for all the countries all over the world, gaining as well as
retaining the faith and trust of the key stakeholders in the major reason behind the
establishment of the corporate governance framework (Said Mokhtar and Mellett 2013).
Conclusion
The above discussion discusses about the necessary aspects of corporate governance
and it is visible from the above that the implementation of effective corporate governance
framework is necessary for the companies to avoid the corporate collapses. For this reason,
the companies are needed to ensure the presence of enough independent and external
directors in the board; and need to ensure the absence of dual role of company CEO. It can
also be seen from the above discussion that it is needed for all the companies operating in
Australian to maintain the principles and standards of both ASIC and CLERP 9 for the
development of an effective corporate governance framework. Moreover, all the ethical
principles and standards must be followed by the companies with the aim to make their
corporate governance framework a success. At the same time, the executives of the

9ACCOUNTING THEORY AND CORPORATE GOVERNANCE
companies also have the option to merge their corporate governance framework with
integrated reporting with the aim to bring transparency and accountability.

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References
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