Comparative Analysis of Corporate Governance in the UK and USA

This report provides a comparative analysis of corporate governance regulations in the UK and the USA. It examines the evolution of corporate governance in both regions, highlighting key legislative and regulatory frameworks such as the Cadbury Report, the Greenbury Committee, the Hampel Committee, the Turnbull Committee, and the Sarbanes-Oxley Act (SOX). The report contrasts the approaches taken in each country, focusing on the roles of shareholders, stakeholders, and external auditors in ensuring corporate accountability and ethical conduct. The report explores the impact of corporate scandals, such as Enron, on shaping governance practices and emphasizes the importance of effective internal controls, transparent financial reporting, and the protection of investor interests. The role of external auditors in verifying financial statements and ensuring compliance with regulations is also discussed. The report concludes by highlighting the differences in the approach taken to corporate governance regulation in the UK and the USA and the external auditor's role in relation to corporate governance regulations.

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Table of content
Compare and contrast the approach taken to corporate governance regulation in the UK and the
USA and external auditor role in relation to corporate governance regulations.............................3
REFERENCES..............................................................................................................................11
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Compare and contrast the approach taken to corporate governance regulation
in the UK and the USA and external auditor role in relation to corporate
governance regulations
There are different types of companies and each various plans and policies to run a firm
in a world. Government of UK and US provides different and innovative policies that helps to
increase overall firm performance and productivity in the market. They provide appropriate and
effective policies to the companies which help to expand their business in the world. Corporate
governance code is the framework that consist a set of rules and regulation that helps to maintain
relationship between the employees, shareholders, stakeholders and consumers. To maintain
relationship between the employees in an entity the management needs to give appropriate
environment and give effective policies. By giving efficient policies to the employees it helps to
increase a performance and productivity in the market. Matters began to change in the 1970 in
UK. The government decided to set effective rules and regulations for the stakeholders and
shareholders in the market. All the companies of the UK follow the corporate governance rules
so that it helps to increase firm performance in the market.
Sprawling corporate built in the 1950 and the in 1960 it proved that it is difficult to run a
firm in a market and the trend is underscored by the 1970 collapse of Penn central, a railway
conglomerate. An American law institute which undertakes projects to clarify the area of laws
and that is followed by the organization. In 1992, Cadbury report after sir Adrian Cadbury who
chaired the committee, they developed the set of rules, regulation and principles which are
i9ncorporate into the LSE’s listing rules. It introduces the principles of comply and explanation.
It creates mainly three basic recommendations such as chairman and th4e CEO must be
separated, companies must have at least three non-executive directors and each board must have
audit committee. Firms must need to set effective and efficient rules and policies, that helps to
the employees to maintain relationship between the e4mployees, customers and shareholders.
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Corporate governance has an objective to provide appropriate policies for the companies that
gives more benefit to the entities (Stefaniak, Houston and Cornell, 2012).
In 1995, the Green bury committee was established by the British industry in response to
grow a level of bonus being paid to the senior executives. Non-executive director should be
responsible for identify the level executive director packages. Companies need to set the rules
and policies that helps to increase a performance and helps to expand their business sin the
market. For the effective running business in a world they need to follow appropriate policies
and rules that is provided by the government. UK government provides effective and innovative
plans and policies that helps to maintain relationship between the employees and shareholders
and they also give separate policies for the directors and CEO of the company. In 1998, the
Hample committee was established to review the extent to which the goal of the green buries and
Cadbury reports were being achieved. In 1999, the turn bull committee was created to give
direction and instruction to the internal control requirements of the combined code and it is also
includes the risk management (Alleyne, Hudaib and Pike, 2013).
There are different types of policies that area established by the various committees that
helps to the companies to run a firm in the market. For the effective relationship between the
employees and shareholders they need to follow appropriate and innovative strategies in a firm.
The code contains set of rules and regulations that must followed by the firms. Government of
UK and US provides appropriate policies to an entity to increase a firm performance and they
can easily maintain relationship between the other business and shareholders. If shareholders feel
that a firm follows effective governance structure and policies then it will increase a satisfaction
level of the shareholders and also helps to maintain the trust. UK government code contain the
set of rules and standards which helps to sole the barriers and maintain relationship such as
leadership, remuneration, effectiveness, accountability and relationship with the shareholder’s. If
companies have good relationship between the shareholders and consumers then only it can help
to increase a performance and productivity in the market (Kassem and Higson, 2012).
Firm chairman need to conduct the meetings and find out the issues in the company so
that they can easily find out the appropriate solution for the problem. There are different types of
strategies that helps to maintain relationship between the shareholders and consumers. Firms
needs to follow the effective plans and policies that give more benefit to the companies. They
alsdneed to maintain relationship with the consumers by providing innovative item and services
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to the client. Board of director and non-executive director must have skills and knowledge which
helps to solve the complex situation in the business. There are different types of laws and acts
that are established by the various committees. In the companies mainly two types of auditor
such as internal and external auditor. Auditors helps to prepare annual report for the company
and each firm must have effective sand efficient accountant that helps to create effective and
annual report in an entity. all the director of the firms has a good skill that helps to maintain
relationship between the shareholders they need to conduct meetings so that they can easily
know their needs and thoughts. By knowing the needs of the shareholders, they can easily
modify the policies for them. It helps to increase performance and; productivity in the market.
there are different types of policies and plans that helps to; attract the consumers and
shareholders. By attracting the consumers in the market which helps to increase overall
productivity in the world. in UK government provides effective and efficient policies to the
companies that helps to expand their business in the market.
In USA, the main aim pf corporate governance principle is to maximize the wealth of the
shareholders. The governing bodies of corporate governance includes, Sarbanes-Oxley Act of
2002 (SOX), Securities & Exchange Commission (SEC) and certain guidelines that has been
issued in the name of NASDAQ. Enron corporation failed in 2001 due to bankruptcy in USA.
The most convincing reason that was found for the failure of this company was due to lack of
effectiveness in the corporate governance practices of the company. Some of the common
problems emerged in Enron at that time were, ineffective delegation of powers, manipulative
product strategies, discrepancy in the displayed results in annual reports, neglecting the interest
of shareholders, etc.
Customers and investor are depending on the information that are provided by the
company employees or accountant. The accountant has a responsibility to provide accurate
information and facts to the client. By providing accurate data to the consumers that help to
attract the client and satisfy their needs. It helps to maintain relationship between the customers
and investors. By following appropriate policies of ethics, it helps to increase a level of
confidence in client and helps to create a good relationship with them. There are different types
for technologies that help to maintain relationship with the consumers and investors. Company
director has a responsibility to provide accurate facts about the company to the investor so that
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they can easily take appropriate decision for the business growth (De Simone, Ege and
Stomberg, 2014).
Illegal activities, directly affects the overall firm performance in the market. To maintain
brand image in an industry all companies need to follow appropriate corporate governance rules
so that it helps to maintain performance and relationship between the employees, consumers and
shareholders in a market. There are different types of strategies which help to increase a
performance and helps to maintain effective relationship between the peoples and investors. To
maintain relationship between the investor and consumers, forms needs follows effective rules
and policies and give accurate report and information about their company. In UK and US there
are various firms they use various approaches to maintain efficient relation between the company
and investor. If an entity is not able to maintain relation, then it will directly affect the firm
performance and brand image in the world. Enron got loss from the illegal activity because it
affects their brand image and it directly affects the relationship of the investors. Investors are not
able to coordinate with the company because it affects their trust and relation.
The case of Enron and its major failure inculcated the requirement of adoption of better
corporate governance policies. It helps in assessing that there are various factors that are required
to be considered by the top-level management before reaching to any decision. In the whole
process, the main aim framed to be protecting the rights and interest of the shareholders. Hence,
the focus shifted from organization to stakeholders. They need to give open environment to the
employees so that they can easily share their thoughts and suggestion to the management (Bame-
Aldred and et.al., 2012).
Enron follows different types of approaches that help to maintain effective relationship
between the investors and customers. It tried to have open communication system with the
employees so that what is going in the organization can be communicated to them. Further, they
used to make sure that the responsibilities in the organization are diligently divided so that every
person gets equal and fair chance to perform at the workplace. There are various strategies that
help to overcome the issues such as CEO needs to create open and free environment to the
employees so that they can easily share their ideas and opinions to the management that help to
build effective decision for the specific barrier. Enron pay the charge to the government because
it conducts illegal activities in their company. Director decided to prepare new code of conduct
that helps to maintain relationship between the shareholders and consumers. Management
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provides appropriate training and development to the employees so that they can easily work
together to get desired target (Claessens and Yurtoglu, 2013).
Sarbanes Oxley act provides the higher security to the investors from the fraud
accounting activities that is conducted by the organizations. In USA, there are different types of
plans and policies that help 0074o maintain, relationship between the investors and consumers.
Enron are in the fault of they conduct the illegal activities in the firm. The main aim of corporate
governance with respect to protect the interest of stakeholders was not fulfilled by the company.
Moreover, window dressing was another illegal practice that was adopted by the organization so
as to display better financial performance in front of the stakeholders. They provide an adequate
data and information to the investor so that they are not able to find out the actual data about the
company. This act gives more security and protection to the investor. This act was created by the
government and it gives higher protection to the investor from the accounting malpractice. In
section 302, company need to clarify the reported financial statements (Jo and Harjoto, 2012). In
section 404, firm needs to establish the internal control and methods of reporting to identify the
actual fault. Enron management has a responsibility to monitor their work and find out th4e
problem that are faces by the employees so that they can easily take appropriate decision based
on the specific issues. In UDSA from the analysis it can easily determine that the government
follows this approach to overcome the issue in the Enron such as SOX it gives more security to
the investor and the company need to pay for it. It is illegal activity so they need to pay charge
for it. There are different types of laws and acts that give protection to the investor from the
accounting fraud. By using this act the company can easily get higher performance and also
helps to improve the financial disclosure from an organization (Hermalin and Weisbach, 2012).
UK government provides different types of laws and acts that helps to protect the
investors and consumers from the fraud accounting. There many organizations that follows
various approaches that helps to maintain the data and generate accurate data for the investor. By
giving wrong information about the company they can get loss in the market because it reduces
the trust level and decrease the satisfaction level of the investor. To maintain relationship
between the investor and consumers firm need to take care of them, they need to identify their
views and needs. All the companies in UK follows different types of policies and plans that helps
to prevent the fraud of accounting in an entity (Yee and et.al., 2017).
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SOX act helps to give higher protection to the investor from the accounting fraud. It also
helps to give profit to the company to reduce the complexity to prepare financial report.
Government provides effective and efficient corporate governance to the organizations that help
to maintain relationship and helps to give security to the investors. From the analysis it can be
easily determined that in UK there are many committees that gives more effective policies and
approaches that helps to maintain relationship between the other business and with the peoples.
In this case SOX is the best act that gives more advantages and security to the investor.
Management needs to provide training to the employees to create effective financial statement so
that it will not affects the overall firm performance in a market (Aebi, Sabato and Schmid, 2012).
There are mainly two types of auditor in the company such as internal and external. Both
have different types of roles and responsibilities to prepare effective financial statement for the
firm. There are various characteristics that help to create effective and accurate financial
statement of an entity. External auditor has a responsibility to validate the financial statement of
the firm and if there are some barriers or fault then they can easily take appropriate decision for
the specific problem. External auditor has a responsibility to identify the actual problem and also
need to find out whether their financial statement is accurate or not if they found there is some
issues and in adequate data then auditor need to solve them by applying enhanced approach.
They have a responsibility to find out the fault in the financial statement and validate by applying
advanced strategies (Abbott, Parker and Peters, 2012). It helps in ensuring that all the
requirements and duties of the company is fulfilled.
One of the vital roles is to provide suggestion on financial statement. They have a
responsibility to provide appropriate suggestion to the management when they found some
barrier. UK government provides different types of policies and plans that help to reduce the
problem of the fraud accounting or other issues in a firm. Companies also provides advanced and
enhanced techniques to solve a specific problem in a firm. They need to identify the needs and
fault in the financial statement it helps to create effective financial statement of the specific
company. there are different types of strategies that helps to identify the needs and faults in the
statement. By applying the approaches for the preparation of financial statement which help to
create good and accurate financial statement for an organization (Alabede, 2012). Company
provides different types of policies and plans that helps to the external auditor to create efficient
and accurate financial statement for an entity. It includes, making the financial statement all the
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significant books of accounts available, addressing the queries of the auditor on time, etc. There
are many techniques and strategies to identify the fault and issues in the financial statement. By
knowing the barriers and issues in the financial report a manager can easily take decision for the
particular problem. They can give suggestion for that because they have authority to check
whether the statement is accurate or not. It helps to increase a work efficiency and also helps to
increase overall firm performance in the market. Financial statement must be well managed and
accurate then only the investor will invest in the particular business. A manger has a
responsibility to monitor the work of the employees so that they can easily find out the issues. By
knowing the barriers it can help to take decision by applying various techniques. It has many
advantages in relation to the regulation of the corporate governance (McCahery, Sautner and
Starks, 2016).
Further, role of the external auditor in relation to the regulation of corporate governance
they need to understand the environment and entity. There are different types of consumers and
all they have various preferences so based on the client needs and environment of the firm they
need to create effective financial statement for an organization. It also has a responsibility to
compare the data of other companies in an industry whether there is any regulation that could
stem from faulty financial reports. Based on the company environment they need to create an
effective financial statement for them company. There are different types of approaches that help
to identify the issues and then they can easily take effective decision for the particular problem
(Harford, Mansi and Maxwell, 2012).
There are different kinds of benefits of the external auditor. They have as responsibility
to validate the financial statement and then find out the issues in the statement. By identifying
the barriers company can easily prepare the financial statement for the company. One the best
benefit of the discover the errors in a statement. By identifying the errors in the statement, the
can easily prepare accurate report of the company. Another benefit is that in which the owner
work closely with external auditor so that it helps to create effective financial statement and also
helps to increase a work efficiency in the accounting process. All companies follow different
types of approaches and strategies that helps to increase a work efficiency in a firm. External
auditor has a vital role in relation to the corporate governance. In UK, a government provides
effective and efficient policies to a firm that help to increase a firm performance and increase a
sales revenue in the market (Erkens, Hung and Matos, 2012).
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US and UK follows all the necessary laws and acts that help to give protection to the
company as well as to the investors. In the case of Enron they produce illegal activity in the
company and they need to pay for this but the government of the US provides appropriate
policies and approaches that help to give effective protection and security to the investor. There
are various laws and acts which help to give more benefit to the investor as well as to the
employees. To maintain relationship with the investor company needs to follows appropriate
policies. There are various strategies that give more benefit to the firm to maintain effective
relation. Corporate governance code is the framework which consist many set of principles, rules
and regulation that help to give benefit to the organization. By using different types of
technologies and strategies companies can easily get higher performance and productivity in the
market. There are various laws that helps to give protection and security to the investor which
helps to maintain relationship between the employees, client and investors in the world.
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