Corporate Reporting as a Process - Essay Example

? Corporate Reporting Question Corporate reporting can also be defined as the presentation of distinct accounting methods in different fields such as integrated reporting, corporate governance, financial reporting, corporate responsibility, narrative reporting, and areas concerning executive remuneration. Integrated reporting can be defined as the aspect of joining together certain pieces of information that involve an organization’s decisions that are currently affecting it together with its future and upcoming prospects. It is about connecting the information in Breakavia that focuses aspects of business like strategies of the trade, the threats involved, and the performance (Dipiazza & Eccles, 45, 2002). It is also about the organization and the recognition of what the economy is now, and what the economy ought to be in the near future. Corporate governance explains the types of processes and the ways in which companies and businesses are controlled and directed. They also indicate the level in which the managerial status of company is and include the information containing the board and its composition, the development that it brings and the level of accountability that it holds. Lastly, it focuses on the type of relationship that the management has with its shareholder, seeing that they are actually the owners of the company. Narrative reporting talks about the non-financial kind of work and it relates to financial information. Such information is presented alongside financial information and this enables for there to be an expanded understanding of a company’s main information (Robins, 34, 2010).  Response to the questions posed by the Finance Minister; 1. In Breakavia, the best placed to help in support of the initial development of the regulation for corporate reporting are the upcoming companies and industries, such as those in the industrial sector and also those in the tourism industry. Corporate reporting brings about the much needed transparency that will bring development in the country. There are certain international practices that can be used as examples in this country. Some include those of the companies that are based in the U.K and the U.S. From these countries, there have been major developments and due to their corporate reporting techniques have been named the best suited companies to rise in ranks. Significant information relating to companies include the market position that it holds, the supplies and the suppliers that it deals with, the general private and public performance both in and out of office and also the company’s future prospects. The next type of reporting, corporate responsibility shows basic information that pertains to the way that companies behold its image with its clients, their dealers, the society and the area or environment around them. Such information helps them attract and retain more clients and shareholders while still managing to increase the level of trust that the shareholders have put in the company (Stittle, 56, 2003).  Financial information about companies like in the United States brings transparency and enables a company to be able to maintain its major and final outlook. Financial regulation by the government is a form of regulation that allows financial companies and institutions to be subject to checks and guidelines. They also subject to certain restrictions, which are aimed at bringing about foreclosure of financial system and thus, bring about the rise of integrity of a financial institution. The financial regulation procedures can either be handled by the government of the state, capital markets and also other third parties. As for the regulation by the government, there are laws that govern such activity; for example is, The Companies Act containing company law. There are also other legislations and edicts that are involved in the financial regulation of a business by the state. Regulation by capital markets is whereby there is the establishment of stock exchange to stipulate measurement and also certain reporting requirements. It also helps to scrutinize and pave way for the acceptance of financial statements that are usually prepared under IFRSs and sectorial regulation. One main example would be FSA for the banking industry. Then there is the regulation by an independent third party. This is the Standard setter for the country on corporate reporting. An example can include the equivalent of ASB (55Aps, FRSs); IASB (IASs, IFRSs). It mainly talks about the role of FRC in trying to enforce the regulations to promote confidence in corporate reporting and corporate governance etc. They consult with preparers, users and others in the financial and business community on best practice.  In order to ensure that financial reporting is done in an efficient and transparent manner, there are certain factors to be considered. The presence of conceptual framework for the preparation and presentation of financial statements is significant. Such statements include the statement of principles for financial reporting issues in disclosures, valuation (fair value accounting), presentation, recognition, accountability, transparency, standard reporting practices, clarity and understandability of reporting standards that will check and also prevent creative accounting (Everingham & Kana, 78, 2008). This will help in maintaining the financial trust and capability of a company and thus will be more accountable. Regulatory regime can be enforced in the country if there is the equivalent of FRC overseeing audit practices board, corporate governance committee and enforcing regulations. Such will go a long way in ensuring that there are no companies that are left back in the quest to search for financial accountability (Blowfield & Murray, 67, 2011).  There should also be an enforcement arm to review defective financial statement to enforce compliance and maintain high standards of corporate reporting and governance, which underpin the healthy functioning of markets to the benefit of business investors, employees, members of pension schemes and other interests. This will enhance the country’s economic strength in competitive international markets. When speaking about accounting information, it is important that such heavy and dependent information be used by investors and other stakeholders since it is them that own these companies. Conclusion and Recommendation The benefits of regulation versus cost include; the ability for companies to be able to maintain its public image and also for the company to maintain its stakeholders while still managing to attract more stakeholders and also bring about change. Regulation enables for there to be transparency. The government can be perceived as a friend to business and all it does is to ensure that there is the ability for the services that a business provides to be on their best interests. There is the chance of comparability, harmonization, accountability transparency, clarity, and also efficient distribution of capital with regulation. Question 2 Corporate governance, as discussed in the financial report, can be defined as the regulation of a business and also the mechanisms that involve the market. It also speaks about the relationship and the role of a company’s management team, the board, the shareholders and also the stakeholders. Anyone who is important to the business is awarded the proper attention when it comes to speaking about corporate governance. It also speaks about the roles and for which a financial corporation is governed from. Over the past few years, corporate governance can be defined as a system of law and also sound approaches in which corporations are managed, directed and controlled. This helps in the focusing on the internal and external corporate information and structures with the intention of following up and monitoring the actions of the body that is concerned with management and the directors. This helps in preventing and reducing the level of risks that involve the agency which may arise from the misguided actions of corporate officers. Corporate governance is the formal mechanism by which companies and also other entities are directed, regulated and controlled. It is how they govern themselves and this is consistent with the interests of shareholders and other stakeholders to achieve a long-term sustained increase in value. The major external stakeholders include shareholders, those who have debts within the company, creditors, and here they include trade creditors, suppliers, customers and also the society and the community in general. Internal stakeholders may include the board which consists of directors and managers. There is also the involvement of the executives and also other employees in the business. Much of the main areas of interest in this field are concerned with prevention of the conflicts of interests that occurs between stakeholders. There are many ways which can be used to prevent such occurrences of such types of conflicts. Methods of avoiding these clashes of interests consist of the processes, traditions, policies, decrees, and institutions that have a say on the way a financial institution is controlled and managed. When it comes to corporate governance, one important theme that can be associated with corporate governance is the nature and extent of accountability of people in the business. Such people bring about the business and its survival. When it comes to corporate governance in the United States, one can relate to the 2002 Act. The Sarbanes Oxley (SOX) Act 2002 talks about perceived weaknesses in ‘auditing’, ‘reporting’ and ‘corporate governance’ issues that are present in US listed companies. Then on a later date, there exists another act that also dwells on the corporate governance of financial institutions. The Dodd-Frank Act 2010 for financial institutions dwells on the responsibilities that directors have and also the regulation of accounting firms who can audit public companies corporate reporting and enforcement (Greuning, Scott & Terblanche, 121, 2011). There is more when it comes to corporate governance. It not only talks about the governance of the financial information but also talks about the CEOs and CFOs and their requirement that they certify their annual accounts and quarterly reports to ensure accuracy and also ensure that they are not misleading. They should also ensure that they have met their responsibility for evaluating internal controls. Another fact to be considered is the fact that the body of boards must accept responsibility for system of internal control and are also charged with the responsibility of ensuring that they review and report such information to shareholders (Martin, 145, 2006).  When it comes to corporate governance in companies situated in Breakavia, there are a number of factors that need to be understood by individuals. The key features of corporate governance include a Board of directors that should be very intent on the long-term sustainability of their business. This should be their main focus. Then there are the split roles that include the management system. Those in the management system include the Chairmen and also the CEO and the Managing Director of a business. Another feature includes the Board and they should be independent. They include the Non-Executive Directors with a senior NED who acts as a custodian. There is also the Executive Directors who have specified and major roles of given clear and functional roles on which they should act on (Previts, Walton & Wolnizer, 201, 2011).  There is the Audit Committee which is of the Board and contains only NED members. They are limited to a minimum of 3 members. They include; independent of the finance function and the external auditors. These individuals are charged with the role of overseeing business risks. There is also the Remuneration, which also consists of only NEDs and Nominations Committees. This also includes the majority as NEDs and they are in the Board. Corporate governance concentrates on the emphasis of the effectiveness of the internal controls and also the effectiveness of the internal audit function. Another feature that stands to question is the fact that there is the explicit “going concern” statement from the Directors. Service contracts of no more that 1 year for Director are also a key feature (Steger & Amann, 28, 2008).  Corporate governance was influenced by the major corporate failures that have occurred in the UK and the US and also other places. Most of the major corporate failures often involve unethical and weak external auditors and Boards of Directors. Examples include Barings, Enron, WorldCom, Arthur Andersen, Global Crossing, and Northern Rock. Many former directors have had to be prosecuted and jailed for misdeeds that involve financial information (Tricker, 102, 2012). Corporate failures have created a climate of doubt and distrust amongst investors as they find it difficult to make informed resource allocation and investment decisions based on the insufficient information available. Stock markets could not perform their role of resource allocation efficiently and that also to a decline in business to confidence. The situation gave rise to anxiety over the prospect of business failure, possible job losses and a decline in the value of saving and investments. All these suggest that something should be done and should ensure that investors and other stockholders find the financial system of a business trustworthy (Alexander & Britton, 98, 2004).  Some of the business benefits of governance include; an effective Board of Directors that carries out its responsibilities with integrity and competence. There is also a competent CEO given the authority to run the business. There is the selection of a good business model and should be run with the Board’s advice and consent (Mallin, 33, 2007). The Board agrees broad strategic goals; the CEO has plans and resources for those goals and effectively executes the plans. There are Systems to ensure that obligations to major stakeholders are met with integrity and comply with laws and regulations. There is also Full and timely disclosure of information to owners and the investment community at large. The major disadvantages that involve corporate governance include; it slows down decision making at board level. Expenditure involving corporate governance is not adding value. Corporate governance is reported as a wasting factor as the information provided is not being read or analyzed adequately. It cannot also guarantee good behavior in business (Gibson, 21, 2012). Bibliography Everingham, G. K., & Kana, S. P. (2008). Corporate reporting. Sunninghill, PricewaterhouseCoopers. Dipiazza, S. A., & Eccles, R. G. (2002). Building public trust the future of corporate reporting. New York, John, Wiley & Sons. Higson, A. (2003). Corporate financial reporting: theory and practice. London, Sage Publications. Robins, P. (2010). A student's guide to analyzing corporate reports. Berkshire, England, Kaplan Publishing. Stittle, J. (2003). Annual reports: delivering your corporate message to stakeholders. Burlington, V. T, Gower. Everingham, G. K., & Kana, S. P. (2008). Corporate reporting. Sunning hill, PricewaterhouseCoopers. Blowfield, M., & Murray, A. (2011). Corporate responsibility. Oxford, Oxford University Press. Gibson, Charles H. (2012). Financial Reporting and Analysis + Thomsonone Printed Access Card. South-Western Pub. Alexander, D., & Britton, A. (2004). Financial reporting. London, Thomson. Previts, G. J., Walton, P. J., & Wolnizer, P. W. (2011). A global history of accounting, financial reporting and public policy: Americas. Bingley, Emerald. Greuning, H. V., Scott, D., & Terblanche, S. (2011). International financial reporting standards: a practical guide. Washington, D.C., World Bank. Tricker, R. I. (2012). Corporate governance: principles, policies and practices. Oxford, Oxford University Press. Mallin, C. A. (2007). Corporate governance. Oxford, Oxford Univ. Press. Martin, D. (2006). Corporate governance: Practical guidance on accountability requirements : A specially commissioned report. London, Thorogood. Steger, U., & Amann, W. (2008). Corporate Governance How to Add Value. Chichester, John Wiley & Sons. Read More