Accounting Theory and Corporate Governance: Practices in Business

This essay examines the intricate relationship between accounting theory and corporate governance, emphasizing the role of corporate governance in guiding accounting professionals to adhere to relevant accounting standards for accurate financial reporting. It highlights the advantages of good corporate governance, such as increased investor confidence, reduced capital costs, and enhanced brand value. The essay further discusses the impact of globalization, social responsibility, and regulatory frameworks like ASIC and CLERP 9 on corporate governance practices. It also addresses the importance of transparency, accountability, and ethical conduct in financial reporting, underscoring the need for businesses to prioritize sustainability and stakeholder interests. This document is available on Desklib, a platform offering a wealth of study resources for students.

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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ACCOUNTING THEORY AND CORPORATE GOVERNANCE
Table of Contents
Part A...............................................................................................................................................2
Corporate Governance Strategies and Policies............................................................................2
Important Corporate Governance Indicators...............................................................................3
Corporate Governance Features..................................................................................................4
Part B...............................................................................................................................................4
Reference.........................................................................................................................................9

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Part A
Corporate Governance Strategies and Policies
The management of Qantas ltd is committed towards ensuring that no activity of the
business affects the environment. The business is engaged in proving airline services to the
clients and the company has made strong progress in reducing our overall environmental impact
(Qantas.com., 2019). The management of the company has appropriately set out targets such as
reduction in usage of power by 20% and reduction in waste generation by 30% by 2020.
The business of Bunnings which is one of the subsidiaries of Wesfarmers focuses on use
of Indigenous means for carrying out the operations of the business. The management is also
dedicated towards the needs of the society and therefore has made community contributions of
$147.5 million, including $86.6 million of direct contributions to community organisations. This
shows that the strategies of the business are formulated to maintain sustainable development in
the business.
Important Corporate Governance Indicators
a. As per the annual report of Qantas ltd for the year 2018 shows that the business has 12
members as board of directors of the business. The business pf Bunnings ltd also has 12
directors who are included in the board of director of the business.
b. The percentage of non-executive directors in the case of Qantas ltd is shown to be
maximum number of non-executive directors in the business which is more than 90%
while in the case of bunnings ltd shows that there are 75% of non-executive directors.
c. The annual report of Qantas ltd shows that there are 83.33% of directors who are
independent while business of Bunnings shows similar results for the business.

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d. The CEO of Qantas ltd is Alan Joyce and he praises the company in the CEO letter that
the business follows appropriate steps for enhancing the value for the business and at the
same time also ensure safety and sustainable practices in the business
(Wesfarmers.com.au., 2019). The CEO further goes on about the recent success which
has been achieved by the business of Qantas ltd in terms of new route which is Perth–
London route which connects Australia and Europe. The management of the company
has also introduced Project Sunrise which would be connecting from the East Coast of
Australia to London and New York. In the case of Wesfarmers, the Chairmen of the
business is Michael Chaney. The chairmen message shows that the business has
undergone certain changes in structure for enhancing the shareholder’ return
(Investor.qantas.com., 2019). The chairmen provide the reasons for fall in net profit and
also states the commitment of the bossiness to return to its profit-making ways.
e. As per the annual report of the business, 45% of shares of Wesfarmers are hold by non-
executive directors. The non-executive’s directors of Wesfarmers holdings show similar
results.
f. The annual report does not show that the shares of either company are hold by any
institution buyer.
Corporate Governance Features
The corporate governance framework which is followed by both the companies shows
that the same follows the suggested framework of ASIC for the purpose of reporting the same in
the sustainable reports which is formulated by the business. The focus of both the companies is
to promote sustainability practices. The difference which can be spotted is that the management

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of Wesfarmers is trying to restructure the business for the purpose of generating appropriate
returns for the shareholders of the business.
Part B
Role of Corporate Governance in Accounting
Corporate governance of rules, processes and practices using which the firm is directed
and control. Corporate governance mainly involves that interest of the company’s stakeholders
which include shareholders, senior management executives, customers, financier, suppliers, the
government and mainly the community. Corporate governance is the one which provides the
skeleton for the achieving the company’s objectives, it looks after every part of the management
and also the plans which include action plan. It also includes the internal control for measuring
the performance of the employees of the company and also measures the corporate disclosure
(Samra, 2016). It also looks after the policies and resolutions set by the company in a single
income year. The corporate governance setting in a business guides the accounting professionals
to follow relevant accounting standard for the purpose of reporting and ensures that the financial
statements are showing appropriate information which can be used for decision making by the
users of the financial statements.
There are in numerous advantages of corporate governance in the company. Good
corporate governance ensures high success and huge economic growth. Due to high corporate
governance the investor gets interested and it also provides confidence to the investor which
helps the company to raise the capital efficiently and effectively. With good corporate
governance it is observed that the company’s capital cost has decreased, which is a good sign for
the company as the company has to incur less amount for the cost (Huang, and Wang, 2015). The

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company having good corporate governance often has high share price. It happens because the
investor of the company gains confidence and hence the company also makes a good name in the
market which makes the company’s share to rise. Due to increase in the share price the company
able to take up good amount of capital from the market and hence this provides the privilege to
the owners as they are stimulated to achieve the objective of the company in that financial year
or in that specific project. This is also a factor which attracts new investors to the business and
thereby enhances the requirements of proper accounting of all transactions of the business. This
also provide the managers liability to take corrective actions in respect to increase the company’s
overall performance and meet the objectives set by the company for that financial year or set for
that particular project. Good corporate governance helps the company’s management to take up
the privilege to understand the customer’s need and also understand the shareholder’s interests in
the market. Good corporate governance helps the management of the company to take correct
decision as it is very much helpful in decision making process of the company. It is seen that the
company who does not possess good corporate governance, then the company moves towards the
mismanagement which leads to the uncanny decision. Good corporate governance also shields
the company from the corruption which can be seen in many companies and which also become
the reason for the fall of the company. It has a big hand in analyzing the risk which exists
between the company and its objective and hence helps the company to save themselves from
such risks. In total it can be said that the corporate governance helps the company to increase its
brand value and also it helps the company to develop.
Corporate governance is there which helps the company to increase the accountability of
the company and it helps the company to avoid massive disaster before they occur. Corporate
governance should include internal affair with extreme prejudice. Due to the change in the in-

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ownership structure has changed a lot. It provides huge pressure on the management of the
company to improve the corporate governance of the company (Rodriguez-Fernandez, 2016).
This will also help the management of the company to make the policies more consumers
friendly and to protect all social groups and also to protect the environment (Tao, & Hutchinson,
2013). Due to the increase in the social responsibility of the companies around the world the
need for the corporate governance has taken a rise as to satisfy all in the society needs to be
backed up by the corporate governance (Armstrong, et al., 2015). Due to increase in number of
scams it is seen that the there is a need of the corporate governance of the company.
Globalization is one of the important part in today’s corporate world and hence to maintain the
decorum and policies of the company it is necessary for the company to maintain the corporate
governance of the company which will help the management of the company to cope up with the
changing world and also the changing environment in the corporate world.
The corporate governance principles which are introduced aim at achieving transparency
and accountability in the reporting framework which is followed by the business. This is also
extended to the reporting framework which is followed by the management for disclosures of
information of the business (Idowu et al., 2013). The management of the company are expected
to present the financial information following all relevant accounting standards and the
information which is presented should be faithfully represented. The corporate governance
practices which are followed by the businesses also allows the management of the company to
have control over the operations of the business and thereby ensuring that the same are done as
per the budget which is established by the management. One of the practices which is followed
by every business for the purpose of checking the accuracy of the financial statement by
conducting an audit for the business. In order to ensure that the different businesses needs are

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follow, ASIC was established for helping the clients with confusions relating to a treatment or
dealing with certain situation.
AISC regularly engages with the stakeholders of the company to provide information
regarding the corporate governance. It is done either through articles, external publications
speeches from the events, publications of the report and many more. AISC also provides
regulatory guides and information sheet which will help the company’s management to use
corporate governance properly. AISC has provided proper guidance to the in-management
conflicts, shareholder engagement, director oversight and financial report, emergence of the risk
management, handling corporate information, executive remuneration, culture, actions involving
share capital and many more (Boatright, 2017). In addition to this, the board also provides
guidance to accounting professionals relating to the reporting framework which is followed by
the business. AISC use these opportunities to inform organizations all over the world about the
concern and AISC also helps the companies to comply with their obligations. ASIC has
promoted the corporate guidance to the organizations doing their business in Australia about the
corporate guidance so that the company can deal with the changing nature. The ASIC also
promotes the use of accounting standards for the purpose of creating proper reports which can be
used by the users for taking major decision regarding the business.
CLERP 9 introduces new changes in the corporate governance of the company doing
their business in Australia. With the guidance from Australian Exchange Board CLERP 9 also
provides huge number of rules which deals with the governance of the matters like auditor
qualifications, auditor’s independence, executive remuneration and also the disclosure of the
document (McCahery, Sautner and Starks, 2016). It includes many thing about the legislation of
the and in particular the difficulty of the legislating for integrity. It is seen that the new rules are

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coming from the behaviour of the customers, employees, and the decision-making process which
is set by the management of the company (Claessens & Yurtoglu, 2013). It is seen that they have
went for more principle-based answer in accordance with the corporate governance. CLERP 9
has also sets rules against the whistle-blowers of the company which can only be settled after the
proper guidance of the company from the management so that they stop such activity.

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Reference
Armstrong, C. S., Blouin, J. L., Jagolinzer, A. D., & Larcker, D. F. (2015). Corporate
governance, incentives, and tax avoidance. Journal of Accounting and Economics, 60(1),
1-17.
Boatright, J. R. (2017). Ethics and corporate governance: Justifying the role of shareholder. The
Blackwell Guide to Business Ethics, 38-60.
Claessens, S., & Yurtoglu, B. B. (2013). Corporate governance in emerging markets: A
survey. Emerging markets review, 15, 1-33.
Huang, Y. S., & Wang, C. J. (2015). Corporate governance and risk-taking of Chinese firms: The
role of board size. International Review of Economics & Finance, 37, 96-113.
Idowu, S. O., Capaldi, N., Zu, L., & Gupta, A. D. (2013). Encyclopedia of corporate social
responsibility (Vol. 21). New York: Springer.
Investor.qantas.com. (2019). Retrieved 29 May 2019, from
https://investor.qantas.com/FormBuilder/_Resource/_module/doLLG5ufYkCyEPjF1tpgy
w/file/annual-reports/2018-Annual-Report-ASX.pdf
McCahery, J. A., Sautner, Z., & Starks, L. T. (2016). Behind the scenes: The corporate
governance preferences of institutional investors. The Journal of Finance, 71(6), 2905-
2932.
McCahery, J. A., Sautner, Z., & Starks, L. T. (2016). Behind the scenes: The corporate
governance preferences of institutional investors. The Journal of Finance, 71(6), 2905-
2932.

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Qantas.com. (2019). Retrieved 29 May 2019, from
https://www.qantas.com/infodetail/about/environment/our-commitment-to-
environmental-sustainability.pdf
Rodriguez-Fernandez, M. (2016). Social responsibility and financial performance: The role of
good corporate governance. BRQ Business Research Quarterly, 19(2), 137-151.
Samra, E. (2016). Corporate governance in Islamic financial institutions.
Tao, N. B., & Hutchinson, M. (2013). Corporate governance and risk management: The role of
risk management and compensation committees. Journal of Contemporary Accounting &
Economics, 9(1), 83-99.
Wesfarmers.com.au (2019). . Retrieved 29 May 2019, from
https://www.wesfarmers.com.au/docs/default-source/reports/wes18-044-2018-annual-
report.pdf?sfvrsn=4