Contemporary Political and Public Policy Issues - Assignment Example

Assignment 2 Name Institution The extent to which Indigenous businesses are a product of accountability and governance measures plus contemporary political and public policy issues In the previous decade, accountability, corporate governance, contemporary political and public policy have greatly drawn a lot of public interest owing to its significance for the economic benefit of the company and the general society (Arjoon, 2005, p.3). News in the recent past have shown sad information about the lack of corporate ethics. Enron, Anderson, Computer associates, WorldCom, One.Tel and HH insurance are some of the companies which are reported to have violated corporate ethics through abuse of the corporate power and questionable accounting practices leading failing stock prices and profit leading to business failure (Arjoon, 2005, p.3). However, in the current times, such cases have declined significantly. Due to increase of corporate failure in early 2000s, some experts argued corporate failures are true reflection of state of accountability and governance measures plus contemporary political and public policy issues. Therefore, this essay will discuss how the extent to which Indigenous businesses are a product of accountability and governance measures plus contemporary political and public policy issues. This paper will use Onet.Tel as Australia Indigenous business and Enron as an international indigenous business to illustrate the statement. Accountability and governance are management terms that derive their origin in England during the tenure of William I in 1066 (Bovens, 2005, p.). Thereafter, its usage spread and now used in nearly all countries of the world. Accountability remains one of the most discussed topics in Australia and American public arena. According to Pollitt and Geert (2005, p.89), accountability is defined as the duty to clarify and justify one’s conduct. An Australian researcher Considine linked accountability to openness, but rather in wide-ranging sense, that is competence and proper application of authority in an organization (Considine 2002, p. 22). However, in America within the political and scholarly discourse, accountability is always used synonymously with the term ‘good governance’. On the contrary, Bovens (2005, p.23) described public policy as the standard prerequisite within administrative platform which is in agreement with institutional customs and law. Accountability, governance and public policy are political factors that adopted by the government to support integrity. Since they operate within a political system, they are influenced by political issues of the country. The collapse of One.Tel is a true reflection of the extent to which Indigenous businesses are a product of accountability and governance measures plus contemporary political and public policy issues. In the early 2000, Australia experienced collapse of numerous companies including One.Tel and HIH insurance among others (Ketz, 2006, p. 51). However, One.Tel was highly emphasized due to the fact that it was a public listed firm. Australia had not set strict laws on accountability, governance measures plus contemporary political and public policy so as to improve integrity. Corporate failures have also been witnessed in the US. The intensity of the collapses depicts weakness in accountability, governance and public policy issues. Considine (2002, p. 25) argued that, in both Australia and US, complexity in legal compliance creates a leeway for company executives to fraud the company and mislead the public about the performance. Arjoon (2005, p.5) claimed the complexity with lawful compliance system which have infuriated the public or citizens are generally legal. For instance, even though filing false financial statement is often unethical but the practice in itself is the fulfillment of accounting principles. According to France et al (2002), laws regulating companies in both Australia and the US are unclear, that judges have attempted time and grasping conceptual and complex financial perspectives, adequately-informed managers have plethora of ploys for denying the responsibilities. Arjoon (2005, p.5) asserted that since criminal laws only applies in the extreme cases, breaches are complex to enforce. For instance, it is the same year that One.Tel collapsed that the government enacted Corporation Act 2001. Similarly, Enron collapsed in 2001, while the US government passed the Sarbanes–Oxley Act in 2002 to deal with fraud cases in companies (Shakespeare, 2008, p.25). The bills were passed in response to numerous accounting and corporate governance scandals. It meant this before these laws; these two governments did not have the capacity to deal with cases of lack of accountability, unethical corporate practices and lack of focus on public policy. Markham (2006, p.41) argued that lack of accountability and violation of good governance and public policy is caused by lack of the internal controls and lack of independence within the audit function. Unless the implementation of internal control and independence of the audit function is put in the law, many executives tend not to focus on these factors because they also have personal interests. Ketz (2006) contended that in both, One.Tel and Enron, young executive was given clear instructions from the middle level managers or had organizational pressure to aid in ethical corporate practices. Also, legal compliance policies such as code of ethics or conduct, mission statements and ethics programs had not been able to help companies conform to accountability, good governance and public policy (Arjoon, 2005, p.6). Indigenous businesses are product of accountability and governance measures plus contemporary political and public policy issues to the extent that every bad or good manifest the strength or weakness of government laws on businesses. Arjoon (2005) pointed out that even though, accounting profession often has a great focus on the internal controls, the practice must be accompanied by the strong that enforce it. However, lack of such laws makes the practice to remain just a theory with personal interest overriding it. Such case manifested in 2001 when both One.Tel and Enron collapsed. Internal controls are the techniques created by a company to make sure there is an integrity of the accounting and financial information (Markham, 2006, p. 82). With internal controls strongly in place, an organization can fulfill its profitability and operational targets. One.Tel had its billing system as a system of control; but it was weak to sustain large operations (Cook, 2001). In the Beginning of its operations, the company put in place billing systems that are adequate to withstand small number of customer base. Nevertheless, the company built its brand and gained more customers. Monem (2011) posited that due to increased customers, the billing system could withstand the number and its processing of invoices started taking several days. Similarly, the company could not trail receipts from clients. Over a long period, One.Tel relied on this billing system for the control despite being poor designed and operating unmonitored (Monem 2011). At the times the company’s IT personnel came to know about such problems, the damage had already been done and there was no way it was going to be effective. Corporations Act 2001 has since put up strong control measures to prevent fraud cases in companies. Similarly, to Australian indigenous business, Enron also had internal control systems. The lack of practice was emanating from weak policy and culture of the same in the US. Before, this company collapsed, several other public companies had failed due to inadequate internal control. According to Shakespeare (2008, p. 27), internal control are not just the system but also the guidelines which ensure accountability and integrity within the organization. It also involves identifying relevant information and communicating it both upstream and downstream to allow the effectiveness of operations. It is a process driven, which is entrenched in the organizational policy and does not depend on individuals. However, in Enron’s case everything depended on individuals, particularly the top level managers. Shakespeare (2008, p.36) asserted that Sarbanes–Oxley Act in 2002 has put up strict measures where the system is put in place to prevent fraud in future. The law has put a system that don not depend on individual to proceed. Sarbanes–Oxley Act Section 302 gives directives on a number of internal practices created to guarantee correct financial disclosure (Shakespeare, 2008, p.27). The officers’ appending signatures must confirm that they have the responsibility for creating and safeguarding the internal controls. In addition, the company must have created internal controls to enable dissemination of the information concerning the firm. Accountability, governance and public policy laws particularly ones touching on the auditor also support and challenge the indigenous organizations. The extent to which the company is a product depends on the strength or weakness of laws. When the government has weak laws, it challenges the executives to manage them appropriately. Furthermore, Moncarz et al. (2006) argued that it gives some executive the loopholes to fraud the firms. Law or ethics on independence of auditor is one of accountability and governance measures plus contemporary political and public policy support or challenge the company. Before the collapse of One.Tel and Enron both in 2001, Australia and the US did not have a strong law and culture of independence of the auditor within the public companies (Arjoon, 2005, p.9). The collapse of these companies thus depicted they are a product of accountability and governance measures plus contemporary political and public policy or lack of it. Independence of auditors at One.Tel was of great concern. Accounting principles hold that an auditor need to be independent in carrying out his duty. However, ABC News (2011) claimed that One.Tel situation lacked independence as its auditor Enrst & Young dealt with other companies which owns it. Enrst & Young was the auditor of both One.Tel and one of its shareholders, Packer family company (Cook, 2001). Such form of practices is challenged by conflict of interest. Ernst & Young offered numerous services to One.Tel which no-audited and as result reduced objectivity and fair opinion (ABC News, 2011). Enron scandal was also marked by a lack of independence. Before being contracted as auditing firm, Arthur Andersen had been so close with Enron hence professionalism was compromised. It means the company could not maintain the independence of the auditor. In conclusion, it is evident that the collapsed companies cannot be credited to one person, but the accountability, governance, political and public issues, law and culture of a country. In other words, indigenous businesses are by a large extent a product of accountability and governance measures plus contemporary political and public policy issues. If a country has strict laws on accountability, governance, political and public issues, its indigenous companies will demonstrate this ethical in its operations and prevent fraud. The research has also found that a country which lacks strong laws on accountability, governance, political and public issues are likely to face corporate failures. This research has revealed Australia and the US experienced several corporate scandals before 2001 largely due to lack of strong laws or complex laws on corporate governance. Both One.Tel and Enron collapsed due to lack of the internal control and independence of the auditor. Countries must learn from Australia and the US mistakes to adopt strong corporate laws to prevent from their public companies. References ABC News. (2011). Role of company auditors under the spotlight. Retrieved 31 December 2016 from http://www.abc.net.au/pm/stories/s309176.htm Arjoon, S. (2005). Corporate Governance: An Ethical Perspective. Retrieved 30 December 2016,https://sta.uwi.edu/conferences/financeconference/Conference%20Papers/Session%205/Corporate%20Governance%20-%20An%20Ethical%20Perspective.pdf Bovens, M.A.P. (2005). ‘Public Accountability’, in: E. Ferlie, L. Lynne & C. Pollitt (eds.), The Oxford Handbook of Public Management. Oxford: Oxford University Press. Considine, M. (2002). The End of the Line? Accountable Governance in the Age of Networks, Partnerships, and joined-Up Services. Governance, 15(1), 21-40. Cook, T. (2001). Collapse of Australia's fourth largest telco adds to growing list of corporate failures. Retrieved 31 December 2016 from http://www.wsws.org/articles/2001/jun2001/onte-j08.shtml France, M., Carney, D., McNamee, M., and Borrus, A. (2002). Why Corporate Crooks are Tough to Nail. Business Week. Ketz, E.J. (2006). Accounting Ethics: Critical Perspective on Business and Management. New York: Routledge Markham, J. W. (2006). A Financial History of Modern U.S. Corporate Scandals from Enron to Reform. Routledge. Moncarz, E.S, Moncarz, R., Cabello, A., & Moncarz, B. (2006).The Rise and Collapse of Enron: Financial Innovation, Errors and Losses, 17-37. Retrieved 5th August 2016 http://www.ejournal.unam.mx/rca/218/RCA21802.pdf Monem, R. (2011). The One-Tel Collapse: Lessons for Corporate Governance, Griffith University, pp.1-33, viewed 14th June 2016 from http://www98.griffith.edu.au/dspace/bitstream/handle/10072/42673/74746_1.pdf Shakespeare, C. (2008). Sarbanes–Oxley Act of 2002 Five Years On: What Have We Learned? Journal of Business & Technology Law. 3(2): 333-353. Read More

Arjoon (2005, p.5) claimed the complexity with lawful compliance system which have infuriated the public or citizens are generally legal. For instance, even though filing false financial statement is often unethical but the practice in itself is the fulfillment of accounting principles. According to France et al (2002), laws regulating companies in both Australia and the US are unclear, that judges have attempted time and grasping conceptual and complex financial perspectives, adequately-informed managers have plethora of ploys for denying the responsibilities.

Arjoon (2005, p.5) asserted that since criminal laws only applies in the extreme cases, breaches are complex to enforce. For instance, it is the same year that One.Tel collapsed that the government enacted Corporation Act 2001. Similarly, Enron collapsed in 2001, while the US government passed the Sarbanes–Oxley Act in 2002 to deal with fraud cases in companies (Shakespeare, 2008, p.25). The bills were passed in response to numerous accounting and corporate governance scandals. It meant this before these laws; these two governments did not have the capacity to deal with cases of lack of accountability, unethical corporate practices and lack of focus on public policy.

Markham (2006, p.41) argued that lack of accountability and violation of good governance and public policy is caused by lack of the internal controls and lack of independence within the audit function. Unless the implementation of internal control and independence of the audit function is put in the law, many executives tend not to focus on these factors because they also have personal interests. Ketz (2006) contended that in both, One.Tel and Enron, young executive was given clear instructions from the middle level managers or had organizational pressure to aid in ethical corporate practices.

Also, legal compliance policies such as code of ethics or conduct, mission statements and ethics programs had not been able to help companies conform to accountability, good governance and public policy (Arjoon, 2005, p.6). Indigenous businesses are product of accountability and governance measures plus contemporary political and public policy issues to the extent that every bad or good manifest the strength or weakness of government laws on businesses. Arjoon (2005) pointed out that even though, accounting profession often has a great focus on the internal controls, the practice must be accompanied by the strong that enforce it.

However, lack of such laws makes the practice to remain just a theory with personal interest overriding it. Such case manifested in 2001 when both One.Tel and Enron collapsed. Internal controls are the techniques created by a company to make sure there is an integrity of the accounting and financial information (Markham, 2006, p. 82). With internal controls strongly in place, an organization can fulfill its profitability and operational targets. One.Tel had its billing system as a system of control; but it was weak to sustain large operations (Cook, 2001).

In the Beginning of its operations, the company put in place billing systems that are adequate to withstand small number of customer base. Nevertheless, the company built its brand and gained more customers. Monem (2011) posited that due to increased customers, the billing system could withstand the number and its processing of invoices started taking several days. Similarly, the company could not trail receipts from clients. Over a long period, One.Tel relied on this billing system for the control despite being poor designed and operating unmonitored (Monem 2011).

At the times the company’s IT personnel came to know about such problems, the damage had already been done and there was no way it was going to be effective. Corporations Act 2001 has since put up strong control measures to prevent fraud cases in companies. Similarly, to Australian indigenous business, Enron also had internal control systems.

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