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Strengths and weaknesses of financial literacy
Strengths and weaknesses of financial literacy
Strengths and weaknesses of financial literacy
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This research question is regarding to the case of ASIC v Healey (2011) 196 FCR 291. On October 2009, they were sued by The Australian Securities and Investments Commission (ASIC). There were many controversy regarding this matter as overly harsh and unduly harsh. Some considered this as a wake-up call for directors by Katz, Lipton, Rosen and Wachtell to take responsibility by fulfilling their duties so they will act with a degree of care and diligence. On the contrary, some considered it as overly harsh due to the requirement to the understanding of financial literacy. This essay will provide a summary of the ASIC v Healey case followed by the decision made by judges and why they made the decision then lastly followed by our opinion regarding …show more content…
Justin Middleton stated that Centro group breached s180(1) because the directors did not exercise their powers with a degree of care and diligence since they did not read the financial statements. Under s344, directors have the obligation to read and understand the financial statement established in Morley v ASIC [2010] NSWCA 331. On the other hand, Mr Hullah stated due to the large amount and elusiveness of the financial report it is unreasonable to expect non-executive directors to detect the errors (ASIC v Healey, 2011, p342). However, Justin Middleton stated the board has the power to control the information they receive (ASIC v Healey, 2011, p 346). The utmost importance is that the directors have to able to comprehend with the information at hand thus they should have controlled the flow of information to ensure that they received a prospectus that is intelligible to them. Hence, under General Corporation Law s 141(e) they are fully protected from liability for breach of fiduciary duty if they receive“…advice of any reasonably carefully selected advisor as to matters that the director reasonably believed to be in the advisor’s area of expertise” (Kat, Lipton, Wachtell & Rosen., 2011). Furthermore, they defended themselves by using the judgement rule, s180(2), since they claimed to have followed the procedures and processes. However, under s189, …show more content…
After all, directors are more familiar with company and its day to day transaction more than anyone else since that is their responsibility. Even though the directors have followed the procedures and received advice from qualified advisors from management and auditors that does not mean the directors do not have to assess the information received under s189 which was established in Sheahan v Verco & Hodge [2001] SASC 91. The directors stated that there were too many information which compromised of 450 pages. However, as Justin Middleton said the directors could minimise the information so they will only receive the vital information and that is intelligible to them. After all, it is important for directors to comprehend what sort of situation they are encountering and to certify that the financial statement is accurate. Otherwise, if the directors do not go through financial statement and relies solely on the auditors and management then being a director would have less requirements which can lead to an unqualified person becoming a director and causes the company to wind up. Not to mention, directors are meant to be more experienced and knowledgeable accumulated through their lifetime since that is what differentiate them from
Andrea may decide not to inform the limited partners about the misrepresentation of Skyline Views’s financial statements; to avoid conflict, this decision permits Ed to deceive the company and limited partners. In addition, by deciding not to inform the limited partners of Ed’s deceit, Andrea would be disregarding the American Institute of Certified Public Accountants Code of Professional Conduct in her being unreliable, dishonest and deceitful. Andrea has the responsibility of protecting her client, which involves encouraging the correction of financial statements in order to prevent suspicion during audits that could lead to fines and imprisonment. Andrea’s second option is to inform the limited partners about how misrepresentations of Skyline Views’s financial statements are permitting Ed to claim a higher management fee; this decision will fulfill her due diligence obligation to the limited partners while maintaining her integrity as a certified public accountant in supporting the American Institute of Certified Public Accountants Code of Professional Conduct.
This decision was made in good faith and cannot be conspicuously construed to have self-interests veiled in them. Further, the executive directors made an informed decision to refrain from passing this information to the board and they did believe that this would be in the best interests of the company as disclosure would have brought an end to the company’s existence much before the actual downfall. Thus this judgment met all the requisites prescribed under the provisions of Section 180 (2) of the Corporations Act, 2001 (Rawhouser, Cummings and Crane 2015). This case was the first to comprehensively lay down the business judgment defense and apply it to the facts and circumstances of a case. This defense would negate the apparent breach of the duties of the directors as prescribed by the statute and under common
This case is based on Mrs. Jennifer Sharkey, who sued J.P. Morgan & Co. (JCMC), Mr. Kenny, Mr. Green, and Mrs. Lassiter, alleging breach of contract and violations of the SOX anti-retaliation statute. The facts started when Mrs. Sharkey was assigned to a Suspect Client 's account where members of JPMC expressed to her their concern regarding to this account because they suspected that the Suspect Client was involved in illegal activities. After Mrs. Sharkey’s investigation, she claimed that she informed her conclusions to superiors Mr. Kenny, Mr. Green, and Mrs. Lassiter, of the Suspect Client 's potential unlawful activities, such as: money laundering, mail fraud, bank engaged in fraud, and violations of federal securities laws. After
This essay will examine key aspects of the recent implementation of the Australian Consumer Law (ACL) 2011, which is the largest overhaul in Consumer Law in Australia in the past twenty five years. The ACL replaces 20 existing State and Territory laws into one national law , the legislation was enacted in two main parts as Schedule 2 of the renamed Trade Practices Act 1974 (Cth) (TPA) - Competition and Consumer Act 2010 (Cth) (CCA) . Aforementioned this essay it will outline the key benefits of the implementation of the act. Furthermore it will critique the Act, whilst exploring the objectives of the legislation.
The decision in Equuscorp is significant, as it has made clear several principles that were once ambiguous under Australian law. It ratifies that restitutionary remedies are unavailable for a claim for money had and received where recovery would reduce coherence in the law. Furthermore, Equuscorp has confirmed that a bare cause of action can be assigned where the assignee has a genuine commercial interest in its enforcement.
The suit was ref the board of directors and key officers, alleged breach of fiduciary duty, abuse of control, gross management, waste of corporate assets, unjust enrichment, and breach of fiduciary duties for insider selling and misappropriation of information. The plaintiffs had met their rule 23.1 burden to plead with particularity their claims of demand futility. (Case: 1:04-cv-00041 Document #: 142 Filed: 02/28/07 Page 2.) The conclusion of this case is the defendants’ motion to dismiss plaintiff’s verified shareholders amended derivative compliant (122) with prejudice is granted. The case was hereby terminated. Case: 1:04-cv-00041 Document #: 142 Filed: 02/28/07 Page
This short paper is about the court decision between a financial advisor, a cohort of the financial advisor, and the investor. This decision deals with what is known as holder in due course or HDC. By being able to understand the court’s decision and how HDC works, we are able to decide whether or not it is fair. I am also able to give my thoughts on HDC, which are based both on this court’s decision and readings from the text.
Case: Pascal Surocco et. al. v. John W. Geary. California Supreme Court, 3 Cal. 69; 58 Am. Dec. 385. (1853)
As a consequence of the separate legal entity and limited liability doctrines within the UK’s unitary based system, company law had to develop responses to the ‘agency costs’ that arose. The central response is directors’ duties; these are owed by the directors to the company and operate as a counterbalance to the vast scope of powers given to the board. The benefit of the unitary board system is reflected in the efficiency gains it brings, however the disadvantage is clear, the directors may act to further their own interests to the detriment of the company. It is evident within executive remuneration that directors are placed in a stark conflict of interest position in that they may disproportionately reward themselves. The counterbalance to this concern is S175 Companies Act 2006 (CA 2006) this acts to prevent certain conflicts arising and punishes directors who find themselves in this position. Furthermore, there are specific provisions within the CA 2006 that empower third parties such as shareholders to influence directors’ remuneration.
Howells, Peter., Bain, Keith 2000, Financial Markets and Institutions, 3rd edn, Henry King Ltd., Great Britain.
The second lesson concentrates on the importance of financial literacy. There is one rule to follow so as to understand financial literacy – “Know the difference between an asset and a liability, and buy more assets.” In order to do this, you need to be able to understand and comprehend numbers instead of jus...
The oversight responsibilities of the board, the CAE lacking of expertise or broad understanding of financial controls and responsibilities, and the understaffed internal audit functions lacking of independence and direct access to the board of directors contributed to the absence of internal controls. To begin with, the board should be retrained to achieve financial literacy to review financial reporting. Other than attending formal meetings, the board of directors should be more involved with the management. For the Audit Committee, the two members who were recruited as acquaintances to Brennahan need be replaced with experts who are more sufficiently knowledgeable about accounting rules beyond merely “financially literate”. Furthermore, the internal audit functions need to expand with different expertise commensurate with the expanded activities of the organization, testing financial reporting rather than internal controls from an operational perspective. The CAE should be more independent and proactive to execute audit plans, instead of following orders from the CFO, and initiate a direct and efficient communication between internal audit and audit
An independent director supervises the financial reporting process of the company and releases the financial reports of the organization, they review the periodical financial records, review the constitutional performance, review the problems like failures in the payments, consult with the accountant to know the scope of the audit, study the uses of funds which are issued from public. Independent director plays an important role for shareholders, particularly to the marginal shareholders who always looks for an independent director as it provides clarity of working of an organization and independent director also helps to maintain proper access in solving the conflict. In companies when their management decision for workers, lenders and suppliers independent directors plays an important role in maintaining the interest of the stakeholders. Independent director has a direct role in providing the decisions such as plans, performance and risk estimation that affect the enterprise.
Moreover, the auditors had looked out the attitude or rationalisation of the company to justify the fraudulent action. The top management may behalf on their own interest but not the behalf of shareholders to maintain or raise the stock price of the company. In Cendant case, the CUC’s management allegedly inflated earnings by recording increasing revenue and reducing expense to meet expectation.
Financial education teaches students practically the old saying that “when life gives you lemons, make some lemonade”. Also, financial education teaches students to build a wealth plan that is personalised to fit their individual needs, beliefs, customs and values. Peoples’ interests, hubbies and values differ and simply following financial advice given by someone who knows little to nothing about who students are and what values they have may end up misleading them, leading to dire consequences. Financial education is therefore a form of self-defence against some life-damning advice given by people on financial decisions that have no fit in the student’s life. In recent years, we see the bar of financial prodigies being raised.