Legal Responsibilities in Business Regarding Financial Activities - Case Study Example

Legal responsibilities applied in business Name Name of the institution 27 September 2015 In the world of business, there are rule and regulations that are enacted in order to govern the operation of the business.1 How these rules are enforced differs from the type of business in operation. It is, therefore, essential for people running the business to understand the legal acts that govern their business. In many states across the globe, the establishment of business law has been essential as it provides legal education in the business department. In any business, the directors have the mandate of preparing financial statements that are applicable to the rule and regulations. As such, the concept of company law demand directors of any business to formulate and organize the financial statement in accordance with the law. Therefore, this paper focuses on identifying the legal responsibilities that a director possesses in a business regarding financial activities. To start with, reflecting on the template of Century Insurance Ltd (Century), it is a legal responsibility for Andrew, the director of Century Insurance Ltd to present yearly financial records that will define the framework of the business (Gov.uk, 2015). The accounting standards clearly indicates that, the directors has a legal mandate of presenting fairly financial statements that are accordance to the financial year of any business1. Therefore, Andrew should apply legal roles in preparing financial records that has the content of presenting the business financial positions, the business performance in terms of finances, and as well the content of the business cash flows. For Andrew achieve to achieve the mentioned functions the directors he is required to present a faithful record in accordance with the business transactions, and business events1. More so, the director should carry out the mandate in reflecting the recognized criteria for the business belonging such as assets, business income, business liabilities as well as the business expenses. In order to achieve a fair 2presentation, the director of Century Insurance Ltd should comply with all the accounting and financial policies. As such, in the presentation of the financial records, the Andrew should present information in a way that the information provided is reliable, the information is good as the business transactions and the information presented is understandable by all the stakeholders of a business (Gov.uk, 2015). Moreover, it is a legal responsibility for Andrew to present financial records that show that the Century Insurance Ltd has the capability of continuing with its operation. In addition, at the Century Insurance Ltd, the Andrew, the director of the insurance company, has a legal obligation for keeping and enhancing appropriate accounting records. The records should be in a position to disclose financial records that are reasonably accurate at any time. The main purpose of Andrew keeping a proper financial record is that the business will have the capability of safeguarding its assets. Moreover, the records will raise the alert of any fraud in business and prevent the occurrence of any irregularities in the accounting department. It is the accuracy of the record that will ensure that Andrew prepare appropriate payments reports in the company. Furthermore, as a director of Century Insurance Ltd, Andrew have a legal obligation to ensure that the company’s website is maintained, and it offers integrity to all the stakeholders. In this context, Century Insurance Ltd Company’s financial record should be maintained in a manner that it differ from other firms functioning on the same line. In the law regulating the accounting function, each company should enhance financial records that differs from any other jurisdiction and it is reliable to the stakeholders involved in the business operations. Lastly, as a director to Century Insurance Ltd Company Andrew should have a lawful responsibility of ensuring that the auditors of the business are aware of the significant audit information. (Gov.uk, 2015) For appropriate financial records, Andrew should be in a position of understanding and knowing the audit information of the company. With such knowledge regarding the audit information, the directors should exercise the mandate of establishing that the auditors of the company are familiar with the audit information. Focusing on the template that is related to this paper, Andrew has not honored his responsibilities. In the report he provided the board with, the statements have the problem regarding the date of the records, and some of the expenses are not included in the report. Therefore, it is, in this case, whereby the director of the Century Insurance Ltd, is required to understand his potential lawful liabilities. As such, the director decision in the Century Insurance Ltd should be taken collectively by the members of the directors. Moreover, as his part of a potential obligation, Andrew cannot position3himself as a director of his own. This case of a director acting as his own happens unless the board of any business appoint one director. Additionally, the director of Century Insurance Ltd has a potential lawful responsibility of acting as a normal employee. The fact that an employee is a director, it does not mean that he/she has executive influences in the business. The powers of the directors are defined in accordance with the law that are binding their responsibilities. Basically, Andrew have the responsibility of undertaking the responsibility of day to day decision on behalf of the company’s shareholders. Moreover, as a finance director in business, Andrew have limited roles since the accounting department is one of the fundamental function in the business operation. Importantly, paying much attention on the second template regarding this paper, directors plays a vital or rather a crucial role in the organization (Gov.uk, 2015). So as to ensure the success of any business, directors should enhance there is no conflict arising from personal interest. This is the situation in which directors may be involved in a competing personal interest with either any member of the business or any other appointed director. Such competing can be an obstacle for a director to achieve his/her obligation in the business. Therefore, 4for a director to avoid the situation of either direct or indirect conflict in the business he/she should have certain responsibilities. Taking into consideration of the case of Publico Ltd (Publico) company, one of the director acted in a manner that showed the case of conflict of interest. Wafer, the director of Publico Company, did not honor her legal responsibilities in regard to the case that was surrounding the company. Evidently, Wafer the director of Publico Company did not discharged her lawful obligation in a way that will enhance the avoidance of the conflict of interest. In this situation whereby Publico Company was arranging for a proposed transaction, Wafer the director did not applied her duty as a director not to transact with the target of benefiting from the third party. To a better understanding, Wafer was aware of the fact that the proposed deal of the company may have led to the reduction of the value of the business as a result of property that was being purchased. Later, after the company transacted with the purchase of the property, the company undergoes heavy losses. Therefore, it through the mentioned facts, that one can highlights that the Wafer, director of the Publico Company acted in a manner of personal interest. Moreover, it is the mandate of any directors and non-executive members in a business to act in good faith in the situation of a business transaction. Referring the situation template talking about Publico Company, Wafer the director and Tam have engaged in the act that does not represent god faith in the company. As such, all members of a team in a company either directors or workforce members should work in good faith for the interest of the business (Gov.uk, 2015). In addition, all the stakeholders involved in running the business should ensure that the action of any transaction should be executed in order to endorse the best interest of the business. Going back to the case of Publico Company, both Wafer and Tam were aware of the consequence of the transaction they were undertaking hence making them be classified as not discharging their legal obligation in good faith. Referring more to the case of Publico Company, Wafer has used her position in order to facilitate her personal interest. In short, she did not implement her legal duty of being loyal to the company (Gov.uk, 2015). In fact, she transacted in the business of purchasing the land so as to enhance personal gain. At all-time in any business directors should maintain 5their loyalty to protect the interest of the business. In the case relating to Publico Company, the Wafer should have avoided the conflict between her responsibilities and self-interest. Maintain Finally, it can be outlined that both Wafer and Tam have breached the roles and duties that are set for directors. Due to the transaction, the company suffered some financial losses. This can be seen as an act of fraud to the company and the consequences of fraud is negative to the performance of the business (Gov.uk, 2015). Consequentially, Publico Company encounters huge losses as the two conduct in the act of personal interest. Moreover, as a result of the conduct the company will not achieve its objective of earning profits. The two caused injuries to the financial standing of the company and hence the conduct of the shareholders. Conclusively, the lawful duties of a director apply in both cases of the private and public companies. Moreover, the duties of a director are also essential in the non-government business as the act of good faith is the backbone of the success of any business. Therefore, it is the responsibility of the board to enhance that directors follow the rule and standards of accounting in conducting any financial business. In addition, for a better performing business6 directors should maintain a review of their conduct so as to ensure good conduct in carrying out their duties. Reference Philip, Herzberg and Michael welsh, (2013). Understanding company law. Thomas Reuters, Australia Gov.uk,. (2015). Running a limited company - GOV.UK. Retrieved 28 September 2015, from http://www.gov.uk/running-a-limited-company/directors-responsibilities Read More