Corporate Governance and Accounting: A Study of Failures and Reforms

This report examines the crucial role of corporate governance in accounting practices. It begins by defining the core principles of corporate governance, including its importance in balancing stakeholder interests, and the significance of internal controls. The report then focuses on the CLERP 9 reforms in Australia, highlighting their impact on financial reporting and the role of the ASIC. Case studies of corporate failures, such as National Australia Bank (NAB) and One.Tel, are analyzed to illustrate the consequences of poor corporate governance. The report also discusses the adoption of Integrated Reporting (IR) and its drivers, emphasizing the importance of transparency, accountability, and ethical behavior in financial entities. This analysis underscores the critical link between robust corporate governance and sound accounting practices, offering insights into how these principles contribute to financial stability and stakeholder trust.

Accounting Theory and
Corporate Governance

Role of Corporate Governance in
accounting
 Defining procedures for the companies essential directing and
controlling
 Balancing the interests of the stakeholders, customers, suppliers,
government and the community
 CG will provide the relevant framework for attainment of the
company objectives
 CG includes internal controls to measure the corporate disclosure and
performance measurement

CLERP 9 in Australia
 CLERP 9 in July 2004 was responsible for modifying the Corporations
Act 2001
 Introduced licensing obligations pertaining to the financial service
licenses for managing the conflicts in the interest and addressing
independence of the analysts
 Changes brought in CLERP 9 were able to make significant
improvement in the financial report
 Make the audit procedure more transparent

Role of ASIC
 Regular engagement with the stakeholders
 Disclosure in matters associated to issues in the articles of external
publications, speeches in the events, information sheets, regulatory
guides and publication of the reports
 Use of opportunities for informing the interested individuals on
matters pertaining to the current concern on ASIC
 ASIC’s viewpoint has been incorporated in the CG for introductory and
procedural guidance such as managing the conflicts, emerging risk
management, corporate actions pertaining to the relevant share
capital and handling corporate information

Corporate Governance in
corporate failures- NAB
 Previous evidence for failure of the company pertaining to the CG
may be referred with “National Australia Bank (NAB)”
 CG failure at NAB is mainly suggested with the problems related to
culture
 The CG risks were also considered with control and the management
risk
 The absence of accountability pertaining to the management and
board has originated from the preceding CEO
 Decrease in profitability in terms of decreasing efficiency in the CG

Corporate Governance in
corporate failures- One Tel.
 CG identified with major gaps in the financial reporting of the
company
 Problems in reporting the information about the directors and
committees namely Rodney Adler and John Greaves
 It was later observed that neither Rodney Adler and John Greaves
were independent director
 Lower proportion of the remuneration package adding to corporate
failure

Adoption of the IR
 Main drivers for the adoption of the IR may comprise of both pull and
push factors
 Stakeholders of the group like customer, investors may be able to
demand increased level of disclosure for encouraging the companies
to adopt IR
 Compliance and regulation may act as a special adoption for the IR
 Financial entities will be able to account for the corporate governance
by including better compliance for ethical behaviour, corporate
integrity, accountability and transparency in IR

Thank You