Corporate Governance - Assignment Example

Strategic Ways in which an Accountant Contributes to an Effective Governance Q Describe howin your role you have contributed toward effective governance The large amount of money involved in big companies increases corrupt activities within the business practices. Since the board of directors and executives of a corporation are among the individuals who are behind the practice and development of a corrupt culture, the European corporate law behind the UK model of companies are focused on investigating shareholders and board of directors (Dine, 2008). Corporate governance is actually a system of authoritative direction or government which includes the specific role and responsibilities of the owners or the shareholders, the board of directors, and the Chief Executive Officer (CEO). (Colley et al., 2005) Aside from discussing the universally accepted roles and responsibilities of shareholders, board of directors, and the CEO; corporate governance is often used as a policy for business organization in relation with the actual structure of the board, the activism of the shareholders, and overall business performance (Aguilera et al., 2008). As part of our organizational policies and procedures, the board of directors behind the business organization plays a crucial role in the success of corporate governance aside from the increase in the company’s profitability and overall business performance by continuously hiring and firing the company’s top management (Nordberg, 2007; Kim & Nofsinger, 2006: p. 41). In line with strengthening the corporate governance, the company’s executive and non-executive directors are responsible in making important objective business decisions for the best interests of the company (Mallin, 2007: p. 125). The only way for executive and non-executive directors to perform their duty effectively is to have an access to the company’s business information. (Waldo, 1985: p. 5) Therefore, the board of directors are required not only to carefully analyze the corporate financial report but also to meet regularly to discuss the proposed strategic plans and issues that will significantly affect the success of the business (Solomon, 2007: p. 103). Since business’ shareholders are also the owners of the company, these individuals have the authoritative power to manipulate any forms of legal or illegal transactions that will occur in the business (Romano, 1996). For this reason, executive directors are encouraged to take advantage of their rights to look through the company’s official documents. In the process of going through the company’s financial statement, executive shareholders should take note of any signs of unusual business records that could adversely affect the long-term business operations by consulting the issue with the group of non-executive directors to avoid unnecessary bias judgement. In general, accountants play a crucial role in maintaining effective governance in the sense that accountants are responsible in maintaining an accurate and transparent financial accounting information at all times. As an accountant, it is important on my part to provide an accurate, true, and fair financial statement not only to enable the senior managers to make important business decision making that will promote a continuous business growth but also to give the public stockholders the privilege of being able to accurately monitor their investments with the company. To ensure the accuracy of the corporate financial statement, the business organization should invite qualified external auditors to maintain fair and true financial values. Q.2 In what ways did you make sure you acted in the best interests of all concerned? By taking a due diligence, maintaining ethical accounting integrity, taking accountability of management to company owners, and ensuring that the financial reporting is correct, true, and accurate, my profession as an accountant will ensure that the accounting practice within the business organization is in accordance with a good corporate governance. Improving the company’s risk management aside from providing the board of directors of the assurance that the figures presented in the financial statement is accurate and true as well as satisfying the needs of the internal and external regulators are among the few strategic ways that will ensure that I have performed my duty as an accountant to the best interests of all the people concerned. Basically ensuring the corporate management as well as the internal and external stakeholders of the company such as in the case of the public stockholders that the company’s financial statement is accurate, true, and fair will provide the general public with the assurance that the business is being controlled effective. As a result of improving the business management, overall business performance, and protecting the interest of both the business owners and the rest of the stakeholders will prevent and minimize the possibility that the company will suffer from negative publications related to fraudulent activities. As an accountant, I have made up a strong decision not to be blinded by any form of corrupt activities that will endanger my profession and integrity as a well dignified accountant. In the past, I have experienced many times that some business owners and executive people would try to approach and offer me with exceptionally high salary with extra benefits and packages. The group of business executives offered me a job opportunity as an accountant in exchange with the need to enable them to earn extra huge amount of profit by altering the sales figures in the financial statement as a strategic way of avoiding the need of the company to pay high amount of taxes. Since one of my responsibility as a professional accountant is to protect not only the personal interests of the business owners but also the stakeholders and shareholders of the company, I decided not to accept the job offer to prevent conflict of interests between the business owner(s) and the rest of the company’s stakeholders. Aside from tax evasion, I have also experienced being approached by a powerful senior manager who tried influencing me once to support the business owner’s plan of increasing the company’s sales figure in order to encourage more public investors to buy the company’s shares. Even though I was told that the money gained from the selling of public shares will be used for the company’s expansion plan, I had to think twice and eventually disagree with the senior manager. At the back of my mind, I had to think not only for the company’s survival and / or business growth plan but also the need to protect the stakeholders of the company. Q.3 What negative impact(s) would have resulted if you had not acted in the way you did? Corruption such as bribery, the practice of illegal and marginally legal offshore financing and/or manipulating the corporate financial documents (Dine, 2008) is legally considered as an act of abuse of power on the part of private or public officials (Transparency International, 2004; World Bank, 2002). The act of corruption is not limited to the involvement of government officials. It can occur either privately within an institution. (Kleinig & Heffeman, 2004) If I did not take a due diligence, maintain ethical accounting integrity, take accountability of management to company owners, and ensure that the financial reporting is correct, true, and accurate based on my own personal judgement, there is a higher possibility that corruption related to the manipulation of the company’s financial documents is likely to occur. In case I did not intentionally participated with any corrupt activities within the business organization but accounting errors have been traced with my work, the company can still sue me for accounting negligence. As a result of either intentional committing a corporate crime or simply a pure accounting negligence, my profession as a credible accountant will be at risk because of the possibility that my license as an accountant will be revoked as stated by the law. Manipulation of a company’s financial records is a considered as a serious criminal act since it can negatively affect the lives of thousands of people who are maintaining a direct and indirect connection with the company. In worst case scenario, there is also a possibility for me as a corporate accountant to be imprisoned for several years given that the jury could find concrete evidences that will prove that I have voluntarily participated in manipulating the company’s financial records in exchange with personal financial gains. Aside from losing my integrity and dignity as a competitive accountant, corporate bankruptcy such as in the case of WorldCom and Enron is likely to happen again. The failure of WorldCom started when the company decided to concentrate in acquiring other companies in exchange of WorldCom stocks as a growth strategy (Monks & Minom, 2004: p. 508). The tight market competition combined with its inability to adopt with new technology made the business experienced a significant reduction in its revenues and profitability. Since the company was understaffed, the company’s internal audit department became less focused on monitoring the company’s financial performance. On the other hand, WorldCom’s desire to encourage public investors to invest in the company combined with the personal benefits they receive from the business owner made some of its directors tempted to manipulate its annual financial reports (Stern, 2002). As an end result, a lot of public investors would suffer from losing all of their financial investments with the company. Money lenders such as the case of the local banks will also be severely affected by the fraudulent business activity whereas a large number of employees will also suffer from the negative consequences of losing their job security and 401(k) retirement plan. References: Aguilera, R. V., Filatotchev, I., Gospel, H., & Jackson, G. (2008). An Organizational Approach to Comparative Corporate Governance: Costs, Contingencies, and Complementarities. Organization Science , 19(3):475 - 492. Colley, J. L., Stettinius, W., Doyle, J. L., & Logan, G. (2005). What is Corporate Governance? The McGraw-Hill Companies, Inc. Dine, J. M. (2008). The Capture of Corruption: Complexity and Corporate Culture. European Journal of Legal Studies , 1(3):1 - 37. Kim, K. A., & Nofsinger, J. R. (2006). Corporate Governance. Second Edition. Pearson Prentice Hall Ltd. Kleinig, J., & Heffeman, W. (2004). The Corruptability of Corruption. In Heffeman W. & Kleinig J. (eds) Private and Public Corruption. Maryland: Rowman & Littlefield. Mallin, C. A. (2007). Corporate Governance. Second Edition. Oxford. Monks, R. G., & Minom, N. (2004). Corporate Governance. Third Ed. Blackwell Publishing Ltd. Nordberg, D. (2007). Review and Commentary: News and corporate governance. Journalism , 8(6):718 - 735. Romano, R. (1996). Corporate Law and Corporate Governance. Industrial and Corporate Change , 5(2):277 - 340. Solomon, J. (2007). Corporate Governance and Accountability. 2nd Ed. John Wiley & Sons, Ltd. Stern, C. (2002, July 11). Washington Post. Retrieved September 28, 2008, from WorldCom Leased Jet to Director for $1: http://www.washingtonpost.com/ac2/wp-dyn/A52443-2002Jul10?language=printer TransparencyInternational. (2004). Global Corruption Report 2004. London: Pluto Press. Waldo, C. N. (1985). Board of Directors: Their Changing Roles, Structure, and Information Needs. Quorum Books. WorldBank. (2002). The New Anticorruption. In Dine J.M. (ed) The Capture of Corruption: Complexity and Corporate Culture European Journal of Legal Studies. 2008. 1(3):1 - 37 . Read More