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What are the roles of external audit in corporate governance
Role of external auditors for financial statements
Importance of internal auditing
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1. Introduction
Vocation Ltd as an Australian education and training provider had entered into voluntary administration just over 12 months since the company was suspended of almost $20 million government funding in 2015 (KEATING, 2015). ASX (2014) principles are set for better regulation on corporate governance which is believed as an essential factor to achieve good governance outcomes. Therefore, this essay will focus on how a better application of Corporate Governance (CG) Principles can possibly prevent the failure of Vocation.
2. Background
According to the Administrator of Ferrier Hodgson (2015), the lack of available liquidity to fund operations and the lack of ongoing support from key stakeholders finally caused the collapse of Vocation
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As good risk management can not only help to keep company’s established value, they can also assist in capitalizing and identifying to create value. According to principle 7 recommend to have an internal audit faction, the role of internal auditor is to help the board monitor and manage risk directly.(ASX 2014).
However, according to Agency theory, agent has the duty to act in the best interests of the principal, but in order to reduce the risk that managers might undertake risky decisions, boards should monitor and control the agent’s behavior. In addition, the risk are treated by internal audit as monitorial or manageable may not be documented and assessed, which is increasing the cost of company(Spira & Page, 2003).
Vocation does not have an independent internal audit function, thus managers fail to recognize the risk of acquisition, while vocation didn’t realize the government policy that governments change from providing vocational-based training traditionally shouldered and leave it to private operators. When vocation fail to receive the funding, the company will immediately fall into a serious financial crisis.
4. Analysis of
Chet Craig is the Central Plant Manager of the Norris Company. He started as an expediter in the company's eastern plant and was quickly promoted to Production Supervisor in three years. After two years, he was promoted to Assistant to the Manager of the Eastern Plant. Five years later, Chet was transferred to the central plant as an Assistant, and after one month, was promoted to his current position.
In conclusion, internal controls include separation of duties, assignment of responsibilities, third-party verification and the use of mechanical and physical controls. In and of themselves, these tactics stop and prevent much abuse of the bookkeeping and accounting systems. The addition of Sarbanes-Oxley requirements in 2002 require that a company enact internal controls and assign responsibility of the control system to executives and directors, further providing insurance that financial reporting is accurate. Without this insurance that reports are accurate, company stock will fall and investors will be lost. Even with intrinsic limitations, the positive aspects of good internal controls far outweigh the negative implications. Good internal controls equal accurate financial records and future company success.
hese actions led the board of directors and regulators to add reforms when the VOC’s charter was renewed in 1622 by limiting Director appointments to three years per terms instead of life, increased involvement by shareholders via nine elected shareholders that had to be consulted by the Heeren XVII on important matters, and who would also maintain and oversee the accounts for the company to ensure the legitimacy of the books. Yet, despite this reform in the VOC’s charter, regulation in the market was lacking, as the States General was laissez faire in the market allowing for speculation, risky future exchanges, and market manipulation in markets outside of the VOC.
According to the Case Management Society of America, case management is "a collaborative process of assessment, planning, facilitation, care coordination, evaluation, and advocacy for options and services to meet an individual's and family's comprehensive health needs through communication and available resources to promote quality, cost effective outcomes" (Case Management Society of America [CMSA], 2010). As a method, case management has moved to the forefront of social work practice. The social work profession, along with other fields of study, recognizes the difficulty of locating and accessing comprehensive services to meet needs. Therefore, case managers work with these
INTRODUCTION There have been some remarkable corporate collapses in Australia since the beginning of the 21st century, for instance, the failures of Tel. One and HIH Insurance. It is alleged that the collapses of these two companies was due to their poor corporate governance practices. These incidents have raised a question about the current corporate governance practice in Australia. This article is going to examine this issue in particular regarding to the concept and standard of director’s duty of care, skill and diligence (hereafter referred as “duty of care”).
Agency Theory or Principal Agent Theory is the relationship that involved the contractual link between the shareholders (the principals) that provide capital to the company and the management (agent) who runs the company. The principals will engage the agent to carry out some services on their behalf and would normally delegate some decision-making authority to the agents. However, as the number of shareholders and the complexity of operations grew, the agent, who had the expertise and essential knowledge to operate the business and company tend to increasingly gained effective control and put them in a position where they were prone to pursue their own interests instead of shareholder’s interest.
Nearly every major corporation has an internal auditing section. The primary job of internal auditors is to investigate and appraise the effectiveness with which organizational units of the company are carrying out thei...
When planning an audit, the auditor will set up a planned assessed level of control risk. The planned assessed level of control risk can be changed by the auditor. The assessed level is planed depend on the assumptions of the quality of internal control structure. The actual assessed level of control risk is set for each assertion depend on proof of the internal controls. In fact, the auditor cannot change the actual assessed level of control
An agency relationship is defined as a person (the principal) appoints another person (the agent) to act on its behalf, which is also known as the principal-agent relationship. Once there is a conflict of interest between the needs of the principal and the needs of the agent, we call it as an agency problem. The most well known agency problem in modern corporate firms is the conflicts between shareholders and managers. However, the agency problem also exists between shareholders and debt holders. This paper is intended to evaluate the agency problems between shareholders and managers, as well as shareholders and debt holders. The following paper is specified into four sections to evaluate the agency problem. Section I and II mainly focus on
Since every employee is afraid of the security issue regarding the job so their morale is down as they are experiencing downsizing in their organization so they might feel that they would b the next. In this situation it is recommended that internal audit department should perform its function regarding the building of confidence of employees and make sure that proper awareness has been spread between the employees that this downsizing is a strategy of reducing the cost and need not to worry for the employees who is working with honesty and integrity.
Audit is a process to evaluate and review the accounts and financial statement objectively. We can divide it into internal auditors and external auditors. Internal auditors have a inner knowledge of business process. Auditor has access to the much confidential information and all levels of management. But they may lose their judgement and they are not acceptable by the shareholder. “The overall objective of the external auditors is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to report on the financial statements in acco...
Internal Audit is an independent, objective, assurance, and consulting activity designed to add value and improve operations. It helps accomplish objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of governance, risk management, and control processes.
This essay seeks to contrast the difference between agency theory and stewardship theory in a corporate governance. Agency theory is defined as the relationship between shareholders and managers where the manager is expected to represent the shareholders’ best interest without regard for self-interest (John, Makhija, Ferris, 2014). An example of this would be a home owner who advertised property for rent. In this situation the shareholder would be the property owner. The property owner then hired a property management company. The property management company would serve as the manager. In order for this relationship to be successful, the shareholder and the manager would share the same agenda. When shareholders and managers desires are
The Role of the Directors in a Company is of a paramount importance in the discourse of the proper running of the company. Directors are the spirit of the company .The company is merely a legal entity, governed by its directors. These directors have certain duties and responsibilities. These are mainly governed by the Corporation Act, 2001. Section 198A (1) of The Corporations Act, 2001(The Corporations Act 2001 s 198A (1)), clearly states that, ‘The business of a company is to be managed by or under the direction of the directors’.
.... It is the directors’ responsibility to identify potential risks that the company is likely to face or risks already faced by the company. This is basically to prevent such risk to arise again that may negatively affect the company’s operation. By identifying the risks, it allows the company to prepare step by step solutions to prevent or overcome such risk beforehand. It also allows company to take control of risks before risks affect the company seriously.