FNSACC516: Internal Control, Governance & the OneTel Collapse

This report reviews internal control systems, focusing on BHP Group Limited and the OneTel collapse case study. It examines the role of accounting information in decision-making, key internal control failures, and the development of internal control and governance guidelines based on ASX norms. The analysis covers BHP's risk management framework, compliance with corporate governance principles, and the impact of climate change on mining operations. The OneTel case study highlights accounting and reporting failures, ethical issues, and lessons learned regarding audit quality and ethical conduct. Finally, the report develops internal control and governance guidelines for BHP, incorporating COSO framework principles to enhance organizational efficiency and compliance.

FNSACC516 IMPLEMENT
AND MAINTAIN
INTERNAL CONTROL

TABLE OF CONTENT
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
ASSESSMENT TASK-1.................................................................................................................3
Part-A Review an internal control system...................................................................................3
Part-B Case study analysis: OneTel collapse..............................................................................5
ASSESSMENT TASK-2.................................................................................................................7
Develop internal control and governance guidelines...................................................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Internal control is the process of managing an organisation’s effectiveness and efficiency
in order to achieve its objectives (Liu, 2018) The report is aimed to make a review of internal
control system of an organisation which is listed in Australian stock exchange, at the same time a
case study of One.Tel Collapse will also be taken into consideration where various aspects such
as role of accounting information, decision-making, key internal control failures etc. would be
articulated. At the end of the report an internal control and governance guidelines will be
developed considering the norms and sort of legitimation released by ASX.
MAIN BODY
ASSESSMENT TASK-1
Part-A Review an internal control system
Internal control system refers to the policies, procedures, monitoring and sort of communication
practise, norms of behaviour etc. which ensure proper internal operations of an organisation.
BHP group limited is one of the organization of Australia which is engaged in mining sector,
the organisation came into existence in the year 1885. The current CEO is Mike Henry and the
headquarter is in Melbourne, Australia. The organisation is one of the most influential entity
listed on ASX. It is working in mining sector and performing various tasks such as development,
processing of coal, copper, iron ore etc. (Sujana, Kurniawan Saputra, 2020)
Due to raising concerns about the corporate governance in the nation, the ASX corporate
governance council’s corporate governance principles and recommendations came into

existence. The main purpose of the notion is to drive entities in better way to abide with the
norms. There have been a range of such principles were laid down in order to enhance capacity
and strong internal management system of the organisations.
There are mainly eight principles are delivered which consists solid foundation for
management, better structure of board, installation of legal, ethical culture, safeguarding the
integrity, balanced disclosure, rights of security holders, remunerate properly etc. these are
mainly those 8 principles are trying to articulate (Sharma and Senan, 2019)
The entities which are listed having need to abide with the principle 7: recognise and
manage risk” where a set of recommendations had been delivered in order to recognize and
manage risk of the organisation.
The board of a listed organization will be-
Fabricating a committee which would be overseeing risk factors, the committee will be having at
least three members and chaired by a director, they are also liable to disclose some prominent
information such as- charter of the committee, members, reporting period, number of times and
attendances etc. The board will be making a review of risk management framework of the entity.
Organisations like BHP group whose operations are widely disseminated having need of it.
Internal audit functions and how effectiveness of governance is being assessed by the
organisation will be evaluated. So these have been some of the key recommendations which are
laid down to assist internal management.
BHP group is having wide prevalence in the nation so it is abiding with the recommendations
and norms extended by the council. As ASX corporate governance council delivered some
recommendations so the entity is abiding with it to the fullest extent in order to hike its internal
management efficacy.
Single group wide approach is being followed for management of risk. The risk framework of
the organisation is being identified by perceiving Threats and opportunities, the risk assessment
is being carried out by risk assessment committee which is mainly responsible for the overview.
The risks are further classified between Transition risk and physical risk. It can be said that the
entity is generating great amount of profit from last couple of years and legal interferes are also
very low so its efficiency is satisfactory. In the first two quarters of the year 2021 it earned
around 9.4 billion USD (Huang, Wen, 2019)

For better governance and control system the entity is practising it to wider range. It is having
various committees such as board, remuneration, risk and audit, nomination and governance,
sustainability committee etc. which are ensuring rights of various stakeholders. The governance
is being carried out efficiently and documents are also made for instance, security dealing, code
of conduct, diversity positon statement, appointment of director etc.
In Australia there is strong need for BHP group to consider some of legislative, regulatory
requirements relevant to internal control and governance. The organization is engaged in
mining sector which is affecting environment too. Over the time climate change has been one of
the biggest governance or legislative issue. The entity is having need to reform its internal
control and governance so can ensure safety and can mitigate effects of climate change. It is
having need to provide green or environment audit report in efficient manner too so can abide
with the governance needed for mining entities.
The internal control and governance are critical for the entity since the nature of business or the
industry it is working in are very complicated in nature. The entity is developing, processing
iron, copper ore and making them useful for final process so the governance with respect to
climate change is very difficult for it. Yet it has introduced “building blocks of our climate
change adaptation strategy(FY2021-2025)” policy so can improve corporate governance. For
mining company, it is very difficult to deal with rise of digitalisation and over use of data
analysis technology due to their wide operations and lack of proper infrastructure (Wu, Huang,
2022)
Part-B Case study analysis: OneTel collapse
One.Tel has been one of the fastest growing telecommunication entity in Australia which
was founded in the year 1995, it was initiated by Jodee Rich and Brad Keeling, in the year 2001
around 1400 people were Woking in the organisation but in May 2001 the collapse of the entity
came into news. The organisation has been one among fastest growing entities, the
competitiveness was also very higher. Even at the time of collapse it was having superb stats and
was in top four telecommunication entities of the nation (Shahack‐Gross, Shaar, 2018)
The nature of business was very dynamic since it was engaged in telecommunication
business and running business across the nation with the vision of being number one. The
directors were having a lot of plans and it was reflecting in their decision making, strategy
formation etc. in 1998 hey launched “Global Strategy” to expand it to Europe and USA. The

directors were driving business considering market circumstances as well which was hiking their
share prices too. It has launched local call product in 1999 at the rate of 17.5 cents, it was a
bundle with mobile calls, national and global calls. Ultimately it caused them loss but was a
drastic decision of the directors (Mechel, Kurman, 2019)
The role of accounting information in decision making is very large since while
making decision for abiding with various financial aspects of the entity and reaching to a rational
decision, the accounting information are very useful. It suggests ways and also gives better
direction to the directors so can make accurate, rational, economical, valid and feasible
decisions.
It would be fair to say that definitely the directors were known to the notion, they made
two significant changes in the accounting policy, first one was mandatory and second one was
voluntary. They show that unlike others their balance sheet was not producing intangibles. The
cost of expense previously was capitalized. It is clear evidence that they were aware of it but
their inclination was not proper, while making some decisions they were somehow avoiding
using these statements which caused them severe jeopardies too.
There have been a few internal control failures consists sort of accounting and reporting
practices. Internal control of the organization was not much good since it was making some
predictions which did not go well, over expectations, strategic mistakes, and improper pricing
policy, licentious growth etc.
The salient reasons for its failure was internal control system failure, reporting quality, audit
quality, scrutiny, management communication etc. since July 1997 the directors were rarely
observing ledger, journal, trial balance and other accounts which was biggest failure. Even
when it comes to management of earning it was showing poor performance, the accruals were
higher than all its competitors. Even the profits it has shown in the books were due to
conservative policy of accounting. The audit quality had been doubtable there was problem in
applying going concern opinion and abnormal accruals in earning, even in audit there was no
compliance with the standards which affected efficiency of audit (Alshurafat, Beattie, Jones,
2019)
There were a number of corporate governance, legal and ethical issues had prevailed which
ultimately led it to demise. The corporate governance of the organisation was malformed and
having some discrepancies in keeping records. The organisation was constantly getting

unqualified opinions, despite having sort of breaches of corporation acts, audit standards,
accounting standards etc.
Ethical norms were somehow going disappear and entire attention was on making side income
and hiding legal facts. The management was even not giving full disclosure of the information,
non-executive directors were failed to make proper scrutiny, these all aspects led the entity to get
toppled. So it can be concluded that all ethical, legal and corporate governance of the
organisation were escalating (Aviam, Kuwabara, Hasegawa, 2019)
There are a range of lessons can be learnt from the case study of One.Tel. for instance there is
need for every organisation to have well-structured accounting policy and the directors must
review the primary and secondary books of accounts on regular interval. In the organization it
was missing which ultimately led them to manipulate accounts. Accounting reporting system
may also get reformed, the entity avoided the point and it poured on severe consequences to
them (Sobhan, 2021)
The audit process must be ensured, the process and quality of audit is very essential. As it
happened in the entity they did not pay much attention to it and allowed entity to augment their
mistakes.
Abiding with ethical rules is one most prominent aspects, for modern entities it is compulsory
task to practise ethics in the entity so can avoid any moral issue and can augment operational and
strategical performance of entity.
ASSESSMENT TASK-2
Develop internal control and governance guidelines
For BHP group which is a public company listed in ASX. Here internal control and governance
guidelines for the organisation are being developed as-
The business is engaged in mining sector it was introduced in 1885, it started its business of
processing, developing the ore of iron, copper, silver, gas, oil, diamonds, zinc etc. the entity is
one of the biggest entity which is listed on ASX (Akhmetshin, Vasilev, 2019)
Internal control and governance guide for BHP-
The organisation is having need to evaluate its internal control and governance plan which is
being practised at present so can fabricate the new one. Over the time with the progress of time
there are a range of new issues which are taking place and affecting organisational efficiency,

(Bulgakov and Makarenko, 2022) here abiding with “principles of good corporate governance
and best practice recommendations” are rigorously inculcated. For making internal control and
governance guidelines COSO framework is being used where these five steps are to be taken-
1) Control environment- The main objective of the governance and internal control plan is
to make the organization more efficient and eradicate the issues it is facing at present
Being engaged in the mining business having responsibility to reflect positively to
environmental laws. The business is abiding with the standards for such entities.
2) Risk assessment- BHP is performing good yet there are some issues with respect to laws,
ethics, value addition, disclosures, corporate reports, risk management, remunerations,
rights of security holders. Since with the progress of time these all elements are having
need to get reformed even if the entity is practising with proper efficiency yet the need of
improvement cannot be denied.
At the same time the wide operations are creating issues of improving accounting
practices, internal audit, internal check, ethical principles etc.
3) Control activities- For fabricating control activities all eights principles laid down by
ASX “Principles of good corporate governance practice recommendations” are being
used.
The management must lay solid foundation so can decide the roles and duties of every
person working in BHP group. At the same time the structure of board can be made more
effective, their collective skills, knowledge and commitment can be used for enhancing
organisational performance (Zakirova, Klychova, 2019)
BHP group is in mining sector and having issue of climate change so there is need to
abide with 3rd principle which is about ethical practise, there will be a) a code of conduct,
b) a committee to catch breaches.
There will be charter of the committee so can review audit process on time, the security
holders who are already having their committee will be given some extra rights and they
may raise their concerns directly to the management.
Risk assessment team would be reformed where three members and one independent
director will sit so can assess it perfectly and can take mitigating actions. The
remuneration policy is well articulated yet the summary will be disclosed to the
stakeholders.

4) Information and communication- as it is already suggested in the principles of ASX that
how to communicate. There is need for making a separate channel for communication
with shareholders, with other investors there is need of two-way communication so can
sort out their issues too.
The option may also be given to the security holders so they can extend their side and can
receive feedback form the organization it will help to hike free talk and mutual trust.
5) Monitoring- the 1st principle suggests that the board of such companies is responsible for
monitoring effectiveness of its governance and internal control.
So for BHP group the responsibility to keep eyes on the practise of the internal control
policy fabricated. On the other hands the responsibility of company secretary is also very
drastic here, they are liable to monitor the committee and boards, their work, their
approaches, how do they make decisions and if there is any form of discrepancy then will
be extending it in the report.
Risk management which is one of the salient aspect of entire process, so here this is
responsibility of “Risk committee” which will be taking into consideration that how the
management is performing within it comes to risk management, are they following rules,
regulations decided to control the risk or not, if not then will be siting it in the report of the
committee (Susilowati, Mahmud, 2020)
CONCLUSION
Form the report above it can be concluded that in the success of an organization the role
of internal control is very prominent. The report discussed internal control system of BHP group,
which is listed in Australian stock exchange, on the other hands for making the understanding
deeper about role of internal control a case study was taken into consideration about One.Tel
collapse, in the case study various aspects such as their accounting information system, decision-
making, internal control failures etc. were deeply articulated. At the end of the report internal
control and governance guidelines were developed where key aspects or norms released by ASX
had been taken into focus in order to make it more viable.

REFERENCES
Books and Journals-
Akhmetshin, E. M., Vasilev, V. L 2019. Improving management functions at an enterprise:
levels of the internal control system. Calitatea, 20(171), pp.39-43.
Alshurafat, H., Beattie, C., Jones, G. 2019. Forensic accounting core and interdisciplinary
curricula components in Australian universities: Analysis of
websites. Journal of Forensic and Investigative Accounting, 11(2).
pp.353-365.
Aviam, M., Kuwabara, H., Hasegawa, 2019. A 1st–2nd century CE assembly room (synagogue?)
in a Jewish estate at Tel Rekhesh, Lower Galilee. Tel Aviv, 46(1). pp.128-
142.
Bulgakov, S. and Makarenko, E., 2022. The Development of an Integrated External Environment
Monitoring Framework Aimed at the Internal Control of the Procurement
Process of Fat and Oil Companies. Journal of Risk and Financial
Management, 15(2), p.50.
Huang, C., Wen, C., 2019. Lycopene protects against t-BHP-induced neuronal oxidative damage
and apoptosis via activation of the PI3K/Akt pathway. Molecular biology
reports. 46(3). pp.3387-3397.
Liu, J. Y., 2018. An internal control system that includes corporate social responsibility for
social sustainability in the new era. Sustainability. 10(10). p.3382.
Ma, X., Ock, Y. S., 2022. The Effect of Internal Control on Green Innovation: Corporate
Environmental Investment as a Mediator. Sustainability, 14(3), p.1755.
Mechel, C., Kurman, Y., 2019, May. Imaging the collapse of electron wave-functions: the
relation to plasmonic losses. In CLEO: QELS_Fundamental Science (pp.
FF3M-6). Optical Society of America.
Mendes de Oliveira, D. K., Imoniana, 2022. How do Internal Control Environments Connect to
Sustainable Development to Curb Fraud in Brazil?. Sustainability, 14(9),
p.5593.
Shahack‐Gross, R., Shaar, 2018. Fire and collapse: untangling the formation of destruction layers
using archaeomagnetism. Geoarchaeology. 33(5). pp.513-528.

Sharma, R. B. and Senan, N. A., 2019. A study on effectiveness of internal control system in
selected banks in saudi Arabia. Asian Journal of Managerial
Science. 8(1). pp.41-47.
Sobhan, R., 2021. Board characteristics and firm performance: Evidence from the listed non-
banking financial institutions of Bangladesh. International Journal of
Management, Accounting & Economics, 8(1). pp.25-41.
Sujana, E., Kurniawan Saputra, 2020. Internal control systems and good village governance to
achieve quality village financial reports. International Journal of
Innovation, Creativity and Change. 12(9).
Susilowati, N., Mahmud, A., 2020. Good Village Governance: Internal Control Model of Village
Funds Management. KnE Social Sciences, pp.137-148.
Wu, J., Huang, R., 2022. Protection by Hosta ventricosa polysaccharides against oxidative
damage induced by t-BHP in HepG2 cells via the JNK/Nrf2
pathway. International Journal of Biological Macromolecules. 208.
pp.453-462.
Zakirova, A., Klychova, G., 2019, December. Internal Control of Efficiency of Use of Budgetary
Funds. In Energy Management of Municipal Transportation Facilities and
Transport (pp. 98-123). Springer, Cham.