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Ethics in accounting - real life scenarios Jeremy Bentham and John Stuart Mill - John Rawls (1971) Justice theory Kohlberg (1981) cognitive development Kohlberg (1982) theory of cognitive moral reasoning and development (3 levels, 6 stages)
Ethics in accounting - real life scenarios Jeremy Bentham and John Stuart Mill - John Rawls (1971) Justice theory Kohlberg (1981) cognitive development Kohlberg (1982) theory of cognitive moral reasoning and development (3 levels, 6 stages)
Ethics in accounting - real life scenarios Jeremy Bentham and John Stuart Mill - John Rawls (1971) Justice theory Kohlberg (1981) cognitive development Kohlberg (1982) theory of cognitive moral reasoning and development (3 levels, 6 stages)
Becker (1982) Professional judgment argument Blanthorne et al. (2005) Technical, Soft Skills: Career Perspectives Carnegie and Napier (2010) Ideals of professionalism &deprofessionalisation Chambers (1973) Creative accounting IFAC PAIB Committee (2008) understanding role of accounting in SME is imp. Lee (1995) Rob + Coopeer, 1990 Self-interest and public interest of accountants may be integrated Schon (1983) diff. btw prof judgment and tech judgment Sikk (2009) poor audit quality West (2003) portrayals of prof. West (2003) Regulatory fiat: importance of professionals West+ Larson ( 1977) driving motivation of profession may not be altrusim Wilensky (1964) sevice ideal Will mott (1990) sevice ideal Albrecht (1992) integrity Bazerman et al. (2002) Loewenstein, Moore Breach of public interest due to unconscious bias Bedard (2001), Parker (1994), Canning & ODwyer (2003) professional; code of ethics serve a dual purpose Biddle (2006) Moral agency -Value Creation Brown (2006) Prof competence and due care Cottel, Perlin (1990) independence Dellaportas et al. (2005) Normative theories: Should Dellaportas et al. (2005) Limitations of principles-based approach Dent (2009) Organizational culture and significant others Dobson (2005) Moral agency Doucet and Ruland (1994) 3 virtues of particular relevance for accountants to fulfill their responsibilities Hellier & Bebbington (2004) Limitations of principles-based approach Herbert Simon, Guy (1990) Ethical decision-making models Immanuel Kant Deontological theories (non-consequential) Jenning (1999) preparation and reporting of info., earning management Kahneman, Tversky (1972) Indiviual, Cognitive (nhn thc) development, subjective probability Leung & Cooper (2005) ethics in accounting - real life scenarios Jeremy Bentham & John Stuart Mill - John Rawls (1971) Justice theory Kohlberg (1981) cognitive development Kohlberg (1981) Theory of cognitive moral reasoning and development (3 levels, 6 stages) Mele' (2005) Virtue ethics (what people should be) Mintz (1992) Prof. ethics - how one should behave Raymond Baumhart (1970s; 2003) survey "what does ethics mean to you" Rest (1979) Integrity Schein (2004) Relationship between ethical behavior and culture Windal (1990) Integrity Willmott (1990) & Sikka (1989) Public Interest - ethics in practice Teleological theories - Right theory Level 1 Pre-conventional (self-interest) Level 3 Post-conventional (society) Level of moral reasoning in accounting Ethics risk-management framework Social factors: Laws, regulations and culture The AICPA decision tree Level 2 Conventional (position & role) Abbott (1988) Comments on Larsons theory & power literature Albrecht and Sack (2000) Accounting Stereotypes: Scorekeepers American Accounting Association (AAA) Accounting Definition Annual Report of FRC (2010) Requirements on independence of auditors APESB (2010) Professional Ethics Beard (1994) Accounting Stereotypes Bertrand Russell (1955) Situational Ethics Biddle (2006) Value Creation Brewster (2003) Loss of trust in the accounting profession Buckley (1978) Public Interest Carey (1969), Buckley & Buckley (1974) Key attributes of a profession Carnegie (2009) Governance Carnegie and Napier (1996) Accounting: Social Intermediary Chambers (1973) Lack of action to put its affair in order Coate et al. (2003) Accounting Stereotypes CPA Australia Accounting Definition & Service Ideal Dimnik and Felton (2006) Accounting Stereotypes (5) Friedman and Lyne (2001) Accounting Stereotypes (Bean counter) Green (1991) & Clarke (2003) Many accounting issues from 80s is unsolved Greenwood (1957) Key attributes of a profession IFAC (2003) Rebuilding public confidence on Financial Report IFAC (2004) Enterprise Governance IFAC (2005) Professional Accountants in Business Larson (1977) Professionalisation Lonergan (2009, p.24) Accounting: Social Impacts Macquarie Dictionary Accounting Definition Macquarie Dictionary Accounting Definition Millers (1994) Accounting: Wider Social Impacts OECD (2004) Governance Oxford Dictionary Govern and Governance Definition Robson and Cooper (1990) & Willmott Relationship between accounting & social Smith and Briggs (1999) Accounting Stereotypes observation The Australian & Murdoch (2010) #N/A Aristotle - Aristotle Virtue ethics Collins (2003) and Pierce & Sweeny (2004) Stress in the workplace Davenport & Dellaportas (2009) Conflict of interest associated with confidentiality Dellaportas et al. (2007) Organizational culture Dellportas (2005) Same as above Herbert Simon, Guy (1990) Ethical decision-making models Langenderfer and Rockness (1990) 7 steps ethical decision-making adopted by AAA Mathison (1988) Philosophical model of ethical decision-making Ponemon and Gabhart (1993) Circumstances pursue the wrong course of action Schein (2004) Scheins six primary mechanisms Sim (2000), Sim and Brinkmann (2002, 2003) and Dellaportas at el. (2007) Examine the relationship between leadership and culture in Scheins mechanisms Tuller (2000) Accounting work environment Page Narrative 1.6 mc pht cho cc c nhn lin quan 1.13 single most important attribute, dif. Btw prof. and non prof. 1.37 techical imp for first promotion; interpersonal, leadership and communication for parnership 1.8 = 4E, education, ethics, expertise, entrepreneuship 1.32 whatif to follow the "optional accounting rules" - drift (bung tri, lch) 1.26 vital for success for enterprise and economy 1.7 1.13 prof. people have awareness of uncertainty, complexity, instability, uniqueness & value conflict 1.32 question raised abt quality of audit 1.7 images of altruism, ethical service and self-regulation were supplanted by portrayal of prof. 1.14 without judgment, accountant = occupational grp. Depends on the imposition of 'regulatory fiat' = sc lnh 1.7 monopolies; self interest; enlightened self interest 1.10 pivot around the moral 1.10 qualifying + reporting basic fact of economics decision making allocation of resources 2.26 integrity is not enough, need conviction as well; not the one blow the wind, two-faced, hypocritical, or not stand for anything. 2.24 arise from an attachment to the client and a familyartiy with those affected by the decisions 2.67 self-interest and public interest 2.21 knowing where the value is created, where it is lost are keys 2.27 lap BCTC, answer 98% early, 2% accuracy from the detail 2.46 2.11 provide a principle to establish how we ought to behave, irrespective of current social norms and practise 2.33 Principles are also subject to a broad range of interpretions due to vague and generalised wording. 2.65 an ethical culture may also enhance a company's productivity 2.22 2.21 expertise, courage and integrity 2.33 awareness of issues, use of judgment, application of common sense no rationally searching for best alternative; Satisficing: Satisfactory, less than optimal; chi can good enough, k can best outcome 2.18 intention to do the right thing is imp. 2.55 earning mngt ton tai lau doi, some no longer see it as an ethical issue, but accepted it as a biz practice 2.64 a judgment of repreentativeness; lun c potential bias, eg. Framing - ng khung suy ngh, nhn thc 2.9 accountant need 1- competence 2 - right prof decision under pressure and other constraints Utilitarianism accountant need 1- competence 2 - right prof decision under pressure and other constraints 2.19 qualified egatitarian theory, benefits and burdens should be distributed equally, except when an unequal distribution would work to everyone's advantage 2.64 2.20 moral character is seen to be more imp. Than the right action ethical behavior is the result of values such as integrity + good character 2.8 prof ethics is a system or a code of conduct based on moral duties and obligations that include how one should behave 2.5 Thieu khai niem ve systematic process nn not convincing and not consistent 2.26 people with low ego strength -> more vulnerable to situational pressures and distraction --> less able to carry out 'highes ideal' 2.65 significant contribution to the culture and ethical approach of an org+ 2.25 integrity is an element of character and is essential to the maintenance of public trust 2.23 Will-theres no single meaning of public interest; and that the term itself is "slippery, value-laden and vacous" Sillka- pubic interest is "subject to consideration debate and negotiation" Egoism (Ethical vs psychological) Distribute justice #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A NA Mod2 NA Mod2 NA Mod2 NA Mod2 NA Mod2 NA Mod2 NA Mod2 no rationally searching for best alternative; Satisficing: Satisfactory, less than optimal; chi can good enough, k can best outcome NA Mod2 NA Mod2 NA Mod2 NA Mod2 NA Mod2 NA Mod2 Ethics and Corporate Governance Module 1: Accounting and Society Part A: Interaction with Society /Accounting in Society Recruiting the Best (Add value, Lifelong and Professiona capabilities) Depiction of Accounting (Stereotype of Accounting Dimik&Felton) Coate: +Prudence (Social skills), - Colourful Accountant(Downside of Service ideal) Moral Agency (Ethical Approaches to achieve outcomes) Technical Functions and Social Impact 1.- Understanding Accounting (Social practice: Professional capabilities + Service ideal)TSKE/SSKE 2.- Social Impact: Less Prescriptive more judgments) Lonegan: GFC 3.- Theoretycal Analysis of Social Impact Body of Knowledge: Parkers & Millers Macro Level ( Business & goverments - Power and control) Micro Level (Manager & Employee - Motivation and Behaviour) Capabilities Considerations (Sufficient capabilities=complex&difficult professional Judgements) TSKE: General Accounting Activities SSKE: Social Skills & Capabilities well developed Both vital : Lifelong learning for both activities. Accounting roles, Activities & Relationship PAIB : Professional Accounting in Business IFAC-PAIB, value adding, Value creation,. Contemporary role/Main activities of a Professional Accountant. 1. Accountants employed in Large Business (Strategy development & implementation) 2. Public Practice: Accounting Firm Environment-Big 4, Large 7 second tier firms) 3. SME's ( very small SME's relying in SMP's practice. Large firms :few or one Accountant) IFAC: SME'S focus on compliance, not being much value in performance(profitability) PAIB: Accountans reponsible to generate value for the success of company. Ethics ( Moral, Ethics, Business Ethics, Professional Ethics; APES 110, Guidelines &rules) Accounting and Effective Governance Accounting: OECD 2004, Social practice. Corporate Governance: IFAC-Performance + Conformance Part B: Accountants as a member of a profession. Trust and Profession: Integrity, Autonomy, Professional Judgement Atributte of a Profession: Autonomy and Service Ideal A systematic Body of Theory and Knowledge An Extensive Education Process An Ideal Service to the Community A High degree of Autonomy and Independence (Objectivity and integrity) A code of Ethics for members (APES 110, AASB, AUASB, Corporate Law) A Distintictive ethos or culture ( CPA) Application of Professional Judgement (Schon 1988) The Existence of Governing Body (CPA membership) Professions: The 'market control' view (Monopolistic Power, Self Regulation (West 2003) Evolution of the profession Professionalisation: Larson - Power creation Power and Exclusion: (Ethics Vs Profit - Gold Collarism, Kelley 1985) Ideals of Accounting: E's Education, Ethics, expertise and Entrepreneuship Accoutnting Under Challenge Credibility of the profession: Ethics & Failure: GFC failure-Manage Risk & underdtanding Accounting valuation Greater Regulation: AASB, Asic, FRC reporting, and Corporation Restoring Credibility to accounting: IFAC 2009 Recomendations, Sarbanes Oxly 2002, Coso 2004, CLERP 9, CPA,) Reading 1.1: How softskills can boost your career Reading 1.2: The strategic accountant Reading 1.3: Public practice: firm of the future Reading 1.4: Profile: Roel Van Vegel -The sweet sounds of success Questions: 1.1 Recall Lonergan' GFC failured, Was that slow reaction the only cause of GFC? Questions: 1.2 Outline 4 possibles accountig-related roles with an SME and for each role indentify the task to be undertaken? Questions: 1.3 Reading 1.4. Is that busienss ME or an SME? How did the PAIB add value to Andrew Rueu's business? Questions: 1.4 Why have SME's not relied in the past on theirexternal accoutnants for business asvisory? Questions: 1.5 Discuss 4 situations where accountants may aplly professional judgements in their course of work? Module 2: Ethics Part A: Professional ethics Apply the concepts of service ideal The well-being of society The pursuit of excellence ( Professional Behaviour) Community service (Relationship of trust) A code of ethics for professional accountants The conceptual framework (principles-based) approach (APESB : blended code of Principles and rules) Threats Examples of threats Safeguards (Institutionals & In the work Environement) The public interest - an introduction to the code (Accountat primary loyalty is with the public - not client/employer) Fundamental principles of professional conduct Integrity(Straigforward, honest - Financial information) Objectivity (Impartial, honest, free from conflict of interest) Professional independence to the provision (Independence=Objectivity + Integrity) Independance of mind (reality ) and appereance(more desvastating, Lack of indepen) of assurance service Common threats to independence (Examples) Professional independence in practice (s290-291) Provision of non-audit service to an audit client (S290) - Additonal value for an Audit Client) Professional competence and due care Confidentiality Professional behaviour Code of ethics for members in public practice Professional appointment (acceptance should no be granted automately - Solicitation) Referrals (special assigment) Conflicts of interest Incompatible activities (self interest threat) Conflicts between two or more clients (members must not provide services unless consent to do it is received) Second opinions (seek permission from clients) Fees and other types of remuneration Professional fees (billing arrangements) Contingent and referral fees (Actions of transactions/Result of services) Commissions and soft-dollar benefits (Inconsitent with CPA - Professionalims, Fees for commissions: Self interest threat to objectivity) Marketing professional services (Consistency with Professional Behaviour) Code of ethics for members in business Potential conflicts (Undertake task inconsistent with professional duties) Preparation and reporting of information and earnings management (Revenue Recognition, Greed) Reporting with integrity (Public Interest - trust) Professional And ethical failures by menbers/public practice - Sonya Denisse & Trevor Neil) Financial interests (Threats and Safeguards) Gifts, hospitality and inducements Self-regulation and professional discipline The profession's self-regulatory process Accounting professional and ethical standards board (APESB) (high level of Professional Practice) Roles of APESB The quality assurance process (Components: Standard setting, Conformity withstadards, preactice review, Firm regulations) APES 320 Quality control for firms Policies and procedures for address each element Professional discipline (To achieve credibility & confidence of the general Public / Sources of complaint, CPA) Procedures Penalties and appeals Part B: A conceptual framework for ethical behaviour Theoretical approach to ethics A concept map Normative theory - 2 key functions: (Framework for judging moral righteness and framework decision making to resolve Ethical problems) Teleological theories (consequential) Ethical egoism Differences between psychological egoism, ethical egoism (table 2.5) and utilitarianism Utilitarianism Five basic steps Limitation of consequential and utilitarian analysis Dentological theories (Duties) Rights theory Justice theory (Aristoteles) A philisophical model of ethical decision-making (Mathison 1988) Aplication of multiples theories to unethical dilemma Virtue ethics An introduction to professional and ethical judgment Kohlberg's theory of cognitive moral reasoning and development Six stages of cognitive moral development Level 1: Pre-conventional Level 2: Conventional Level 3: Post-conventional Levels of moral reasoning in accounting Factors influencing decision-making Individual (Cognitive development) - Kholbers theory Organisational ( organisational culture, Code of ethics, Others significants) Schein's six primary mechanisms(Leader rely on this, can achieve cultural success, cultural failure, cultural change) Stress in the workplace Professional (APESB) Societal Law and regulation Culture (Confucionism: Japan, China), Relativism Ethical decision-making models (Influences on an Individual Decision) - HEURISTIC American Accounting Association Model (AAA) - Lagender & Rockness Seven steps model AICPA Decision Tree Reading 2.1 Accountants, Ethical issues and the Corporate Governance text? Reading 2.2 Six cures forcurrent Ethical Breakdowns Reading 2.3 Ethics Decision tree fro CPAs in business and industry Questions: 2.1 Consider Implications of an accountant with isufficient time to perform duties? What should you do? Questions: 2.2 Your firm executes investment transactions for a client. You are now asked to audit this client, I s there a threat to yur independence? Questions: 2.3 A new qualified CPA is asked to perform an audit to small company, The accountant has not experience in that field, What should you do? Questions: 2.4 You have been asked to audti 1/2 year finanical statement, (second opninion? Questions: 2.5 You mamage fundraisng company, Soft dollar benefits? Questions: 2.6 New assurance Services without previuos experience, Does this complain with the Code of Ethics? Questions: 2.7 Explain why integrity is an essential attributer of the profession Questions: 2.8 Quality assurance and ethical issues arising from? Questions: 2.9 Utiliarims definitions, problems and difffences? Questions: 2.10 Does you employee have a right to enquiie into activitiess of your personal life? In realtion of rights theory? Questions: 2.11 Which Stage of Kholbert theory of CMD best describe the decision making behaviour of Accountants Module 3: Governance Part A: Overview of Corporate Governance ( Information and Comunication) Why Good Corporate Goverance matters (balancing power of stakeholders = Performance + conformance) Global Imperative ( Professional Accountants role : A+B) Key Factors driving the need for better Corporate Governance Why Corporate Governance is important to APEC economies( valuable source on international views) Key Points / Benefits of Good Governance Goverance and APEC views Governance Definintions / Governance Involves Agency and Governance ( Agents must be aware of concepts and principles of good Corporate Governance) Components of Corporate Governance Shareholders ( Bosch -1995) rights and Obligations Individual Shareholders ( ASA , Media an Internet) Institutionals Shareholders (Insurance companies/ funds ) (Hampel Report, now reflected in UK CGC) Directors and Boards Board of Directors (Bosh Report in Australia, Rogers CJ ( AWA Ltd) Board Chair - Independence( OECD: chair not mention should be Indep.. / UK CGC should be indep..) Role of CEO - Agent of the Board ( Board member and CEO/ Agency relationship arise) Type of Directors (Independent & non Independent Directors) Committees of the Board Risk Management, Nomination, Remuneration andAudit Committee Audit Committee:( AASB: Objectives ans Resposabilitites, Benefists and limitations) Risk Management Internal Control and Risk Management: ISA 215-Ifac2009, Sarbanex Oxley Act US 2002) COSO internal Control - Integrated Framework Internal Control and Risk systems - Including accounting , Risk Control and internal audit Management of the performance elements ( Practical aproaches to exercise considerable judgements) Balance Scorecards: Kaplan and Norton Strategic Scorecards: PAIB - IFAC, CIMA'S obejectives Economic value added - EVA- ROI Internal and External Auditors Regulators : Essential to ensure that companies can compete against each other in a fair an reasonable manner) * Regulations versus De Regulations (Free market (self interest- Miltond Friedman) Principle based ( OCED, ASX CGC and UK FRC) versus rules -based regulations ( US Sarbanes - Oxley Act) Senior Managers and employees generally Other stakeholders ( Governements, Customer, suppliers, environement and Societies generally) Thirty years of Corporate Goverance International Development Timetables United Kingdom Cadbury report (1992) ( Concept of Comply or Explan / If not, Why not reporting) Financial aspects of corporate governance (1992) Principal recommendations of the board Non-executive vs independence directors Strategic role of the board Greenbury Committee Enhanced transparency on directors' remunerations Hampel committee Importance of corporate governance The combined code and the turnbull guidance Combined code of 18 principles and 48 code provisions Number of non-executive directors Higgs review and smith report Composition of the board and sub-committee UK combined code on corporate governance (FRC 2008) United States Committee of sponsoring organisations of threadway commission (COSO) (Report realted to Internal control and Enterprise risk management) Internal control - integrated framework Fradulent financial reporting Enterprise risk management Sarbanes-Oxley act ( Strenghtened Audit requirements, increase financial disclosures, Internal controls) Audit reform Corporate accountability Financial disclosures,loans and code of ethics Criminal fraud and whistleblowing The business roundtable Eight guiding principles of corporate governance California public empliyees retirement system (CalPERS) Corporate governance investment program Other International Approaches International Corporate Goverance Network OECD Principles of Corporate Goverance APEC Australia Bosch committee (1995) Significant corporate governance issues Ramsay report (2001) Key recommendations on independence of auditors ASX corporate governance principles and recommendations (2007) Eight Principles and recommendations Corporate Law Economic Reform (CLERP) 9 Act (2004) Audit reform Financial reporting Other (Whistleblowing, shareholder participation) Governance in other sectors Corporate governance in not-for-profit sector Corporate governance for SMEs Public Sector ( Upright Report: Government entitites examination) Codes and Guidance OECD principles of corporate governance Six principles of corporate governance Basis for effective corporate governance framework Rights of shareholders and key ownership functions Equitable treatment of shareholders Role of stakeholders in corporate governance Disclosure and transparency Other principles regarding disclosure/transparency Responsibilities of the board GFC Response: Understanding The OECD Principles Steering Group: Complementary of OECD principles UK Finanancial Reporting Council Corporate Governance Code (Apendix 3.1) last part of material mod.4 Main Principle: Comply or explain Section A: Leadership (Roles of Board, Divison of Resposabilitites, chairman, non Executives directors) Section D: Remuneration (Components of remuneration, Procedures) Section E: Realtion with Shareholders( Dialogue, Constructive use AGM) ASX CGC Recommendations (if not why not reporting requirement) Lay solid foundations for management and Oversight Structure the board to add value promote Ethical and responsible decision making (code ofconduct) Safeguard Integrity in Financial Reporting (Audit committee) Make timely and balanced disclosure Respect right of Shareholders Recognise and manage risk Remunerate fairly and Responsibly - Remuneration Committee Code for Institutional Investors ( ways for instituional Shs views to performance) The UK FRC Stewardship Code ( disclosure of voting activities) The Blue Book : Guide for fund managers and Corporations 2009 - important for FSC) Part C: International Perspective on Corporate Goveranance Alternative System of Goverance Market Based System (outsider system, Shareholder systems or Anglo Saxon System) Corporate Goverance of US and UK (Shareholders primary focus) CEO/Chair same - Principal agent realtionship Focus in Funds and Insurance company, less in banks ( Disclosures based) Realtionship Based System - European approaches Stakeholders Active recognized Banks play an active role, long term large shareholders protect to threat of takeovers. Insiders groups monitor management, Reduce of Agency problems Different polititcal, legal and regulatory Structures (European contries) Germany and France Relationship Based System - Asian Aproaches Differing Corporate Governance models ( Concentration of Ownership of companies) China: Governement - controlled organisation, 6 maint types of Enterprises. Majority Shs - Single extende family - East Asia - Board dominated by majority shs) Japan(Outsider boards representing SHs or board member are insiders leading managemet) Family Controlled companies and Business Networks - East Asian Part D: Case Studies of Governance Failure Section B: Effectiveness ( Board: Composition, Appointment, Commitment, Development, Information, Supprot, Evaluation, Reelection) Section C: Accountability(Financial and Businessreporting, Risk management and Internal control, Audit Committee and Auditors,) Company Law, Employee representation, Stakeholders issues, Shs rights, Board Structure, Supervisory body, Disclousre Case 3.1 Enron Case 3.2 HIH Case 3.3 Global Financial Crisis Bailouts, Bankrupticies and takeovers Key issues arising from the global financial crisis and Repsonses IFAC (paib 2004) Reading 3.1: The corporate governance lessons from the financial crisis Reading 3.2: The chairman reflects Reading 3.3: The social responsibility of business is to increase its profits Reading 3.4: Responsible business engagement with society Questions: 3.1 Reasons Why good corporate Goverance is seens to be important and benefitial Questions: 3.2 What is major issue that arise form a n agency relationship, where powers of control are delegated. (Conflict of intererst) Questions: 3.3 Describe role of CEO and givexamples of the activities the CEO and board should perdorm? Questions: 3.4 Audit Committee, Benefits and limitations Questions: 3.5 Voluntary Exchange meaning, freem arket and regulated markets Questions: 3.6 What are key issues of governance affecting not for profit organisatiosn? Questions: 3.7 What do you consider are the main corporate governance issues affeccting small business Questions: 3.6 What are key issues of governance affecting not for profit organisatiosn? Questions: 3.15 Market based system * Strenghts and Weaknessess Questions: 3.15 Relationship based systems Advantages and disadvantages Module 4: Corporations and their stakeholders Stakeholder Concepts Stakeholder map Nature of the corporation and key stakeholder relations ( table 4.1) Issues arising from stakeholder theory Agency Theory and Remuneration Corporate Governance and controlling agents ( Corporate Goverance and Theory problems) Directors and other Officers Agency and delegated powers ("Utility maximising Agent" - not acting in the best interest of principal) Agency Theory (Jensesn and Meckling - 1976 : 2 Key assumptions, Barriers to Goal Congruence) Agency Costs Residual costs: (Loss & Cost under performance : An agency cost borne by principals) Over-consumption of perks : (lack og goal congruence: reduce both profitability and Cash flow) Empire building: Financial rewards: Power and influence increase: purcharse subsidiare) Risk avoidance: (Risky investment avoidance because of fixed salary package) Differing time horizons : Perpetual cash flows, interest in the firm for the duration of theiremployment) Bonding costs : reducing residual & monitoring cost for a greater remuneration - borne by agent) Monitoring costs : Cost associated by principals in order to know & control agency matters) Remuneration Issues Remuneration of Executive & non executives director - UK FRC CGC 2010 Disclosure and transparency :non Individual should set their own remuneration. Remuneration Disclosure - International Approaches : France, UK, USA Employees (vital and internal Stakeholders - OECD Guidelines) Australian Consumer Law (unfair practices, penalties and compensation) Occupational health and safety Fair pay and working conditions Family and Holiday Entitlements: Al, Paternity & maternity Leave, others type of entitlements) Ethical obligations - Employee Goverance (Code of conduct - Satysfying the objectives of the OECD principles Case examples of Failure : Nike, James Hardie Whistleblowers Australian Corporation Act Whistleblower Protection ( Example: Sherron Watkins - ENRON) Trade and labour unions (Collectives Bargaining) External Stakeholders ( Considered outsiders in term of Governance) Global Society and Environment (corporations to asssume ethicals leadership) The Economic and Legal System The legal System as a Stakeholder (Good laws to achieve good outcomes and should do so reliably and acces to court) Competition and Protecting Markets for Goods and Services ( monitor by ACCC) Competition Policy ( Competitve markets to avoid Monopolist Corporation) - Policy Objectives Competition and Stakeholders (Maintain competition btw technologies in the bradbank sector, internet providers) Ethical obligations (Collusion btw competitor very bad) - Tab 4.2 International Competition legislation and Regualtions Regulations on anti-competitive behavious (Detailed rules to regulate: Abuse of market power ( Predatory Markets - ACCC: Penalties against Cabagge and Intel) Mergers and acquisition (reduce # of competitors - prohibited or limited) Agreement between competitors - Cartel Conduct Compettitors Collusion -Cartel Behaviour Output Restrictions ( Agreemts wil lcause Shortage in markets - price raises. Allocating Customers Suppliers or territories ( Creating Artificial Monopolies) Bid Rigging (Work collude - Competitve Tenders Inflate price to win a bid) Price Fixing (Parallel Conduct) - Examples Unilateral restrictions on Supply (exclusivng dealing) - Third line forcing: Ilegal, anticompetitive and lessen competition) Resale Price Maintenance (Ilegal practice: sells products above a stated price) Approvals Procedures (Franchises: formal mechanisms to authorise third line forcing - ACCC) Proof, penalties and redress - Criminal and Civil Laws Leading to Criminal Penalties (proof beyond reasonable doubt - Punishment: fines/Jail) Laws with Civil Outcomes and Civil Penalties (Balance of probabilities - Fines: penalties payables to the state) Redress and Penalties for anticompetitve breaches (Redress or remedies, Damages or compensation, Penalties,others) Legal Compliances and Governance (Other real costs) Performance-based remuneration (Fixed:individual/corporation performace and At Risk portion: Reaching certain goals and performance beanchmarking) Workable Competititon ( requirements of workable or effective compettion) (judgements based in Balance of Probabilitites) Non executives Directors: not performance based incentives, Based only reasonable retur for time dedicated to corporation's businesses Executives Directors : Remuneration committee: remunerated for their perfomance/achieving of goal congruence Compliance Programs : Competition Law, Consumer Law, corporate law and others) ) Main benefits) Avoiding Harm ((posible benefits for Compliance programs, Benefits for all major stakeholders) Consumers and Customers Ethical obligations (Long term sustainable realtionshipconsumers (customers)and final product users) Regulation and consumer protection( Table 4.3 Consumer protection Legislation) Guarantees and warranties Misleading Conduct a representation Truth versus truthful impression in advertising (Examples :Joan Sutherland and Nudie Foods) Puffery versus deception (Extreme exageration: Puffery is aceptable) (Deceitfull communication) Unconscionable conduct ( sufficiently unfair as to be considered as Unconscienable) Examples of transactions : Amadio Case - Consumer Law) Tests for unconscionable conduct Suppliers and lenders Considering Suppliers and Lenders as a Stakeholders ( table 4.4) Expanding Ethics (Minimum Ethical Standards should be displayed by supliers / HSBC Supplier code of Conduct) Financial Markets as a Stakeholders (2 governing Theories:Efficency of Markets and Investor Confidence) Roles of Markets ( ROI) Roles of the Media Role of Other Intermediaries ( Investments banks, Consultants and Auditors) Protecting the Financial Markets (Directord / Officers breaking the law) Insider Traiding rules (Key Test in determaining Insider trading, Examples of Insider Trading, Case: PAroo) Owners ( UK FRC CGC (FRC 2010a: Succes of Companies and Informed Shareholders) Shareholders group and descriptions (Table 4.5) Rights, remedies and responsibilities (Table 4.6 OECD 2004: Shareholders rights) Redress or remedy ( Shs unhappy, Unfairly treated: Example - Minority Shs) Representation (OECD, UK FRC, ASC CGC : Guanrantee rights) Shareholders representation ( Table 4.7), Example of iNstitutional Shs) The corporation Distinct features Types of corporations (Table 4.8, Level of Companies: Figure 4.2) Board of Directors / Board Structure Directors should be formally appointed, Types of Behaviour:De facto,Shadow director, type of Agents) Duties and responsibilities of directors - Key Duties: Conflict of interest (Independence od Ppereance and Independence of mind help to assess conflicts of interest) Act in the corporation's best interest ( good faith, Honestly and without fraud or collusion) Nominee directors ( use power for proper Purposes when nominate & appoint directors)) Act for proper purpose ( do not abuse their power - Example Advance Bank) Duty to retain discretion ( do not delegate to theird discretion to act as a director) Duty of care, skill and dilligence (IN australia : SAFE HARBOUR RULE) Insolvent trading (UK / US flexible system, Australia: stricter *Shut down the organisation) Takeovers Legal and ethical considerations (Conflict interest, Lack of Disclosure, Anti Trust andMOnopolies issues) Remedies and Enforcement Types of Remedies If directors refuse to act - Statutory derivative action Account for Profits Compensation and damages Rescission and restitution(restoration of property) Injuction Appointment and Cessation Appointment (UH FRC 2010: directors of top 350: Every year to be subject to shs vote every year as a Director) Resignation Removal Disqualification ( automatic, disqualified 5 years) Automatic disqualifications (criminal Offences) Disqualifications on applications (5 to 20 years - civil penalties) Ethics of disqualification Question 4.1 Anglo American legal system : Commom Law and Cvil law system proved protection to Stakeholders interest? Question 4.2 Diffrences between Company and corporation? Question 4.3 Dexribe Key aspects of the pricncipal and agents problems thatexist within Corporations and result of loss of value for stakeholders queation 4.5 Withleblowing and why has become an inportant component of good corporate governance Module 5: Corporate social responsibiliy Definition and Overview The evolution of CSR - A brief hstory Definition (Commmision of European Communitites, CPA - CSR reporting, Australian CSR reporting practices) The concept of accountability (Linkage between accounting and accountability, Responsabilitties) Gray, Owen and Maunders (1987) Role of Corporate report (and corporate reporting) Social reporting (Components of CSR reporting) GRI guidelines on Social performance indicators The aspects that social reporting encompasses Environment reporting (Component of CSR reporting) GRI guidelines on Environmantal performance indicators Sustainability reporting Definition of Sustainability Reporting - GRI 2007 guidelines GRI performance indicators - (Economic, social and Enviromental performance categories) The externalities created by business organisations (Definition, Positive (benefits) or Negative (cost), qualitatives terms) Gray and Bebbington (1992) on sustainable cost / Calculations The importance of climate change and its relevance to CSR reporting (Carbon tax scheme) Alternative perceptions about the responsibilities of organisations ( Organisations responsabilities/Accountabilities) Milton Friedman on the role of business (shs focus - not strong advocate for Social and envirponemental reporting)) Alternative view - Mathews 1993 ( Community Expectations)) Who are the stakeholders of an organisation? Definition (Freeman 1984) of stakeholders, BHP, Toyota and Amcor focus on Accountability) The shareholder primary perspective Shareholder primary Vs social contract perspective Motivations for embracing CSR reporting (Accountability to Stakeholders or economic focused to protect Shs value) Elightened self-interest Good faith requirements Drivers towards better CSR (BCA) "(Doing right thing" BCA is based in Managerial Reasosining rather than ethical) Motivations for disclosing social and environment information in CSR (Deegan 2009) Stakeholder management Stakeholder theory - The Managerial branch Gray, Owen and Maunders (1987) - (Powerful & Influence Stakeholders in order to get support and Approval) Stakeholder theory - The ethical branch (Managers have a fiduciary duty to all stakeholdersrather than just Shs) Organisational legitimacy (highly motivation for corporations to provide CSR information) Legitimacy theory ( Community perceptions - disclousres in order to survive - non to demostrate Accountability) The social contract (Organisations to meet requirements of both legitmacy and relevance-Schocker&Setti) Methods to legitimise its activities (Dowling & Pfeffer 1975) Course of actions to repair legitimacy (Lindblom 1994) Empirical evidence consistent with legitimacy theory Other incentives tied to maximising the value of the organisation (WBC - Environmental issues ans Financial positions) Preferential capital flow (Investments portfolis - VicSuper Sustainability report) Brand and reputation (Social and Environmental performance - remedial actions to rebuild lost legitimacy (Islam &Deegan) Risk management incentives(Direct&Indirect Costs, Reducing risk - climate change for transparent reporting) Limitations of traditional financial reporting Accounting framework focus in Shareholders primacy perspective. Cannot answer questions related to SocIAL AND Enviromental Performance) Definitions of Elements of Financial reporting Enviromental Resources (Externalities(Benefits/Cost) not controlled by Entity - not considered Assets of the Entity) The practice of discounting future cash flows The Stern review on the Economics of climate changes (Value of the cost of climate change overstimated) Issues of 'reliable measurement' and 'probability' (JI and Deegan - Laibilites & Provsions realted to Externalitites difficult to measure) Yankelovich - Measurement issue - assessment - wrong practice) The entity assumption (Externalitites to be ignored) Current regulations for CSR reporting Requirements embodied within the Corporations Act and accounting standards Corporation Act :Directors to Provide financial details of Environmtnal performance) Corporations act section 299 (1)(f) on environmental performance / Asic require entities to disclose financial/non financial) Corporations act section 299 A on Directors' report AASB 137 Provisions, contigent liabilities and contigent assets -Uncertain(Entities no quantify externaliites, non measureable/reliable) AASB 116 Property, plant and equipment National Greenhouse and Energy Reporting Act 2007 - Objectives NGER Act: Reporting thresholds National Pollutant Inventory (NPI) - Howes 2001 - NPI compel's business to release information Energy Efficiency Opportunities Act 2005 - required to undertake detailed energy assessment to identify oportunitites) Other legislations aimed at motivating improvements in Social and Environmental performance) Australia: Independent pricing and regualtion tribunal, NSW ENErgy Saving Scheme, Commonwealth Renewablwe Energy target Scheme) European Union Emmisions Trading Scheme (Creation of Emmisions allowances) Voluntary frameworks for CSR reporting The global reporting initiative (GRI) - G3 Guidelines, Sectors Suplements, Protocols, National Annexures) Practical applications and testo to help to apply this principle: External factors in defining material topics Internal factors in defining material topics The Guidelines then recommended content International guidance in CSR-related performance and reporting Carbon disclosure project (Carbon emission and climate change represent significant business risk - Investment decision) Accountability AA1000 series & principles Equator Principles (determine, assess ans manage Social and Environmental risk in project financing) The Greenhouse gas protocol GHC Kyoto Protocol - 2 Standards / objectives Trucost (Help to identify high -risk sectors for investments / cash flows - meet environemntal reporting requirments) Social audits and their relationship to CSR reporting (Elkington -Definintion: Assess performance in realtion to Society requirements and expectations) The Body shop Nike Social Accountability International (SAI) - Social Accounting Standards SA2008) Examples of best practice and innovative reporting CSR The zone of acceptability (Identify leading edge / Reporting Sophisitcation) ACCA sustainability reporting awards judging criteria (VicSuper, Fuji xerox, CPA Sustainability report - Positive attributes and recommendations) Integrated Reporting: IIRC missions and objectives for an integrated reporting framework, roles of IIRC International initiatives on climate change - Institutional Framework to reduce emmision(mitigation) and adapting toclimatechange(Adaption). - Kyoto Protocolo The Copenhagen accord (interim measure to address various aspects of climate change) Climate change accounting techniques (Cap-and trade method for carbon emmision - designed as a market based aproach) Financial accounting treatment for Cap and Trade scheme (Fixed price and Floating-price) Accounting for the levels of actual emissions (3 Categories), NCOS -set up by Australian Governement; Genuine csrbon offset) Greenhouse gas emissions ( yarra Valley Water Sustainability report Environmental management accounting IFAC to define EMA, IN realtion to waste - Glad Stated, Deegan: prescrition in relation to creating more refine accounts of waste) Deegan - EMA Benefits Corporate governance mechanisms aimed at improving social & environmental perf Accountable and Transparent, Stakeholders engagement to fulfill thwir environmental and Social responsabilities ISO 14001 Environemntal Management System and ISO 26000 Guidance on Social responsibility Sustainability performance and remuneration - Amcor Sustainability Report: core values/Performance indicators Question 1 : Linkage between Accountability and Corporatereporting Question 2 Nature of Externality, (positive and negative externality Question 6 Explain how any assessment undertaken by management can affect the audience of the reports Question 7 Limitations of financial reporting practices realted to climatechange Question 8 Enlightened self interest against Sustainbale development as a guiding principle Question 18 Identify 5 corporate governance policies thatcould act to enhance an organisation's social and environmental performance. Eco-balance (mass balance:Inflows-production process/outflows -finished products, organisattion to formulate measure to reduce enviromental impact(recycled, waste products, waste and emissions) Page # 1 5-6 1 5 1 6 1 7 1 8 1.- Understanding Accounting (Social practice: Professional capabilities + Service ideal)TSKE/SSKE 1 8 1 9-10 1 11-12 1 11-12 1 11-12 1 11-12 Capabilities Considerations (Sufficient capabilities=complex&difficult professional Judgements) 1 13 1 13-14 13-14 1 13-14 1 15 1 16 1 16 1 16 1. Accountants employed in Large Business (Strategy development & implementation) 1 17 2. Public Practice: Accounting Firm Environment-Big 4, Large 7 second tier firms) 1 18 3. SME's ( very small SME's relying in SMP's practice. Large firms :few or one Accountant) 1 19-20 IFAC: SME'S focus on compliance, not being much value in performance(profitability) 1 21 PAIB: Accountans reponsible to generate value for the success of company. 1 22 Ethics ( Moral, Ethics, Business Ethics, Professional Ethics; APES 110, Guidelines &rules) 1 24-25 1 27 1 27-28 1 27-29 1 30 1 31 1 32 1 32-33 1 33 1 34 1 35 1 35 1 36 1 37 Professions: The 'market control' view (Monopolistic Power, Self Regulation (West 2003) 1 38 39 39 39-40 Ideals of Accounting: E's Education, Ethics, expertise and Entrepreneuship 41 42 Credibility of the profession: Ethics & Failure: GFC failure-Manage Risk & underdtanding Accounting valuation 42-43 44 Restoring Credibility to accounting: IFAC 2009 Recomendations, Sarbanes Oxly 2002, Coso 2004, CLERP 9, CPA,) 45 Questions: 1.1 Recall Lonergan' GFC failured, Was that slow reaction the only cause of GFC? Questions: 1.2 Outline 4 possibles accountig-related roles with an SME and for each role indentify the task to be undertaken? Questions: 1.3 Reading 1.4. Is that busienss ME or an SME? How did the PAIB add value to Andrew Rueu's business? Questions: 1.4 Why have SME's not relied in the past on theirexternal accoutnants for business asvisory? Questions: 1.5 Discuss 4 situations where accountants may aplly professional judgements in their course of work? Page # 2 7 2 7 2 7 2 8 2 8 2 9 The conceptual framework (principles-based) approach (APESB : blended code of Principles and rules) 2 9-11 2 11 2 12-13 2 13-14 The public interest - an introduction to the code (Accountat primary loyalty is with the public - not client/employer) 2 15 2 16 Integrity(Straigforward, honest - Financial information) 2 16 Objectivity (Impartial, honest, free from conflict of interest) 2 17 Professional independence to the provision (Independence=Objectivity + Integrity) 17 Independance of mind (reality ) and appereance(more desvastating, Lack of indepen) 17 2 18 2 20 Professional independence in practice (s290-291) 2 21 Provision of non-audit service to an audit client (S290) - Additonal value for an Audit Client) 2 22 2 26 2 27 2 28 2 29-30 Professional appointment (acceptance should no be granted automately - Solicitation) 2 30-31 2 31 2 31 2 31 Conflicts between two or more clients (members must not provide services unless consent to do it is received) 2 32 2 33 2 3 2 33 Contingent and referral fees (Actions of transactions/Result of services) 2 34-35 2 35 (Inconsitent with CPA - Professionalims, Fees for commissions: Self interest threat to objectivity) 35 Marketing professional services (Consistency with Professional Behaviour) 2 36 2 36 Potential conflicts (Undertake task inconsistent with professional duties) 2 36 Preparation and reporting of information and earnings management (Revenue Recognition, Greed) 2 37-38 2 39 Professional And ethical failures by menbers/public practice - Sonya Denisse & Trevor Neil) 2 38 2 42 2 42 2 43 2 44 Accounting professional and ethical standards board (APESB) (high level of Professional Practice) 2 43 2 44 The quality assurance process (Components: Standard setting, Conformity withstadards, preactice review, Firm regulations) 2 44 2 45 2 45 Professional discipline (To achieve credibility & confidence of the general Public / Sources of complaint, CPA) 2 45 2 46 2 47 2 48 2 48 2 48-49 (Framework for judging moral righteness and framework decision making to resolve Ethical problems) 49 2 50 2 50 Differences between psychological egoism, ethical egoism (table 2.5) 2 51-52 2 52 2 52 2 52 2 52 2 53 2 54 2 54 A philisophical model of ethical decision-making (Mathison 1988) 2 55-56 55-56 2 57 2 58 2 58 2 59 2 59 2 60 2 60-61 2 61 2 62 2 62 Organisational ( organisational culture, Code of ethics, Others significants) 2 62-63 Schein's six primary mechanisms(Leader rely on this, can achieve cultural success, cultural failure, cultural change) 2 64 2 65+66 2 66-67 2 67 2 67-68 2 68-69 Ethical decision-making models (Influences on an Individual Decision) - HEURISTIC 2 70 2 71 2 71-72 2 71-72 Questions: 2.1 Consider Implications of an accountant with isufficient time to perform duties? What should you do? Questions: 2.2 Your firm executes investment transactions for a client. You are now asked to audit this client, I s there a threat to yur independence? Questions: 2.3 A new qualified CPA is asked to perform an audit to small company, The accountant has not experience in that field, What should you do? Questions: 2.4 You have been asked to audti 1/2 year finanical statement, (second opninion? Questions: 2.6 New assurance Services without previuos experience, Does this complain with the Code of Ethics? Questions: 2.10 Does you employee have a right to enquiie into activitiess of your personal life? In realtion of rights theory? Questions: 2.11 Which Stage of Kholbert theory of CMD best describe the decision making behaviour of Accountants Page # Overview of Corporate Governance ( Information and Comunication) 3 5 Why Good Corporate Goverance matters (balancing power of stakeholders = Performance + conformance) 3 5 3 5 Key Factors driving the need for better Corporate Governance 3 5 Why Corporate Governance is important to APEC economies( valuable source on international views) 3 6 3 6 3 7 3 7 Agency and Governance ( Agents must be aware of concepts and principles of good Corporate Governance) 3 8 3 9 3 9 3 10 Institutionals Shareholders (Insurance companies/ funds ) (Hampel Report, now reflected in UK CGC) 3 10-11 3 12-13 Board of Directors (Bosh Report in Australia, Rogers CJ ( AWA Ltd) 3 14-16 Board Chair - Independence( OECD: chair not mention should be Indep.. / UK CGC should be indep..) 3 16 Role of CEO - Agent of the Board ( Board member and CEO/ Agency relationship arise) 3 16-17 3 18 3 19 Risk Management, Nomination, Remuneration andAudit Committee 3 20-23 Audit Committee:( AASB: Objectives ans Resposabilitites, Benefists and limitations) 3 24 3 24 Internal Control and Risk Management: ISA 215-Ifac2009, Sarbanex Oxley Act US 2002) 3 25 3 26 Internal Control and Risk systems - Including accounting , Risk Control and internal audit 27 Management of the performance elements ( Practical aproaches to exercise considerable judgements) 3 27 3 28 3 28 3 29 29-30 Regulators : Essential to ensure that companies can compete against each other in a fair an reasonable manner) 3 30 Regulations versus De Regulations (Free market (self interest- Miltond Friedman) 30-31 Principle based ( OCED, ASX CGC and UK FRC) versus rules -based regulations ( US Sarbanes - Oxley Act) 31 3 32 Other stakeholders ( Governements, Customer, suppliers, environement and Societies generally) 3 32 3 33 3 34 34 Cadbury report (1992) ( Concept of Comply or Explan / If not, Why not reporting) 3 34 3 34 3 34 3 34 3 34 3 34 3 34 3 34 3 34 3 34 Combined code of 18 principles and 48 code provisions 3 34 3 34 3 34 3 34 3 34 35 Committee of sponsoring organisations of threadway commission (COSO) 3 35 (Report realted to Internal control and Enterprise risk management) 3 35 3 35 3 35 3 35 Sarbanes-Oxley act ( Strenghtened Audit requirements, increase financial disclosures, Internal controls) 3 35 3 35 3 35 3 35 3 36 3 36 3 36 3 36 3 36 3 37 3 37 3 37 37 37 3 37 3 37 3 37 3 37 ASX corporate governance principles and recommendations (2007) 3 13 3 13 3 14 3 14 3 38 3 38 3 40 3 40 3 41 42-44 45 3 45 3 45 Basis for effective corporate governance framework 3 45 Rights of shareholders and key ownership functions 3 46 3 47 3 48-49 3 49-50 Other principles regarding disclosure/transparency 3 50 3 50-51 52-54 Steering Group: Complementary of OECD principles 52-54 UK Finanancial Reporting Council Corporate Governance Code (Apendix 3.1) last part of material mod.4 54-55 1-12 Section A: Leadership (Roles of Board, Divison of Resposabilitites, chairman, non Executives directors) 1-12 1-12 1-12 Section D: Remuneration (Components of remuneration, Procedures) 1-12 Section E: Realtion with Shareholders( Dialogue, Constructive use AGM) 1-12 ASX CGC Recommendations (if not why not reporting requirement) 56 57 58 promote Ethical and responsible decision making (code ofconduct) 59 Safeguard Integrity in Financial Reporting (Audit committee) 60 61 62 63 Remunerate fairly and Responsibly - Remuneration Committee 64 Code for Institutional Investors ( ways for instituional Shs views to performance) 65 The UK FRC Stewardship Code ( disclosure of voting activities) 3 65-66 The Blue Book : Guide for fund managers and Corporations 2009 - important for FSC) 3 66-67 69 3 69-72 Market Based System (outsider system, Shareholder systems or Anglo Saxon System) 3 69-72 Corporate Goverance of US and UK (Shareholders primary focus) 3 69-72 Focus in Funds and Insurance company, less in banks ( Disclosures based) 69-72 3 72 3 72 Banks play an active role, long term large shareholders protect to threat of takeovers. 3 72 Insiders groups monitor management, Reduce of Agency problems 3 73 Different polititcal, legal and regulatory Structures (European contries) 3 73 3 73 3 74 3 75 Differing Corporate Governance models ( Concentration of Ownership of companies) 3 75 China: Governement - controlled organisation, 6 maint types of Enterprises. 3 76 Majority Shs - Single extende family - East Asia - Board dominated by majority shs) 3 77 Japan(Outsider boards representing SHs or board member are insiders leading managemet) 3 77 Family Controlled companies and Business Networks - East Asian 78 79 Section B: Effectiveness ( Board: Composition, Appointment, Commitment, Development, Information, Supprot, Evaluation, Reelection) Section C: Accountability(Financial and Businessreporting, Risk management and Internal control, Audit Committee and Auditors,) Company Law, Employee representation, Stakeholders issues, Shs rights, Board Structure, Supervisory body, Disclousre 80 81 3 82-83 84-85 Key issues arising from the global financial crisis and Repsonses IFAC (paib 2004) 86-87 Questions: 3.1 Reasons Why good corporate Goverance is seens to be important and benefitial Questions: 3.2 What is major issue that arise form a n agency relationship, where powers of control are delegated. (Conflict of intererst) Questions: 3.3 Describe role of CEO and givexamples of the activities the CEO and board should perdorm? Questions: 3.6 What are key issues of governance affecting not for profit organisatiosn? Questions: 3.7 What do you consider are the main corporate governance issues affeccting small business Questions: 3.6 What are key issues of governance affecting not for profit organisatiosn? Page # 4 4 4 5 4 5 4 6 Corporate Governance and controlling agents ( Corporate Goverance and Theory problems) 4 6 4 7 Agency and delegated powers ("Utility maximising Agent" - not acting in the best interest of principal) 4 9-8 Agency Theory (Jensesn and Meckling - 1976 : 2 Key assumptions, Barriers to Goal Congruence) 4 8 4 11 Residual costs: (Loss & Cost under performance : An agency cost borne by principals) 4 11 Over-consumption of perks : (lack og goal congruence: reduce both profitability and Cash flow) 4 11 Empire building: Financial rewards: Power and influence increase: purcharse subsidiare) 4 12 Risk avoidance: (Risky investment avoidance because of fixed salary package) 4 12 Differing time horizons : Perpetual cash flows, interest in the firm for the duration of theiremployment) 4 12 Bonding costs : reducing residual & monitoring cost for a greater remuneration - borne by agent) 4 13 Monitoring costs : Cost associated by principals in order to know & control agency matters) 4 13 4 14 Remuneration of Executive & non executives director - UK FRC CGC 2010 4 14 4 14 4 14 4 15 Disclosure and transparency :non Individual should set their own remuneration. 4 16 Remuneration Disclosure - International Approaches : France, UK, USA 4 16-17 4 18 Australian Consumer Law (unfair practices, penalties and compensation) 4 18 4 19 4 19 Family and Holiday Entitlements: Al, Paternity & maternity Leave, others type of entitlements) 4 20 Ethical obligations - Employee Goverance (Code of conduct - Satysfying the objectives of the OECD principles 4 21 4 22 4 23 Australian Corporation Act Whistleblower Protection ( Example: Sherron Watkins - ENRON) 4 24-25 4 26 4 27 Global Society and Environment (corporations to asssume ethicals leadership) 4 27 4 28 The legal System as a Stakeholder (Good laws to achieve good outcomes and should do so reliably and acces to court) 4 28 Competition and Protecting Markets for Goods and Services ( monitor by ACCC) 4 29 Competition Policy ( Competitve markets to avoid Monopolist Corporation) - Policy Objectives 4 29 4 29-30 Competition and Stakeholders (Maintain competition btw technologies in the bradbank sector, internet providers) 4 30-31 Ethical obligations (Collusion btw competitor very bad) - Tab 4.2 International Competition legislation and Regualtions 4 32 Regulations on anti-competitive behavious (Detailed rules to regulate: 4 32-33 Abuse of market power ( Predatory Markets - ACCC: Penalties against Cabagge and Intel) 4 32-33 Mergers and acquisition (reduce # of competitors - prohibited or limited) 4 32-33 4 32-33 4 34-35 Output Restrictions ( Agreemts wil lcause Shortage in markets - price raises. 4 34-35 Allocating Customers Suppliers or territories ( Creating Artificial Monopolies) 4 34-35 Bid Rigging (Work collude - Competitve Tenders Inflate price to win a bid) 4 34-35 4 35-36 Unilateral restrictions on Supply (exclusivng dealing) - Third line forcing: Ilegal, anticompetitive and lessen competition) 4 37 Resale Price Maintenance (Ilegal practice: sells products above a stated price) 4 37 Approvals Procedures (Franchises: formal mechanisms to authorise third line forcing - ACCC) 4 38 4 38 Laws Leading to Criminal Penalties (proof beyond reasonable doubt - Punishment: fines/Jail) 4 38-39 Laws with Civil Outcomes and Civil Penalties (Balance of probabilities - Fines: penalties payables to the state) 4 39 Redress and Penalties for anticompetitve breaches (Redress or remedies, Damages or compensation, Penalties,others) 4 40 4 41 Performance-based remuneration (Fixed:individual/corporation performace and At Risk portion: Reaching certain goals and performance beanchmarking) Workable Competititon ( requirements of workable or effective compettion) (judgements based in Balance of Probabilitites) Non executives Directors: not performance based incentives, Based only reasonable retur for time dedicated to corporation's businesses Executives Directors : Remuneration committee: remunerated for their perfomance/achieving of goal congruence Compliance Programs : Competition Law, Consumer Law, corporate law and others) ) Main benefits) 4 42 Avoiding Harm ((posible benefits for Compliance programs, Benefits for all major stakeholders) 4 43 4 43 Ethical obligations (Long term sustainable realtionshipconsumers (customers)and final product users) 4 43 Regulation and consumer protection( Table 4.3 Consumer protection Legislation) 4 43 4 43 44 Truth versus truthful impression in advertising (Examples :Joan Sutherland and Nudie Foods) 4 44 Puffery versus deception (Extreme exageration: Puffery is aceptable) (Deceitfull communication) 4 45 Unconscionable conduct ( sufficiently unfair as to be considered as Unconscienable) 4 46 4 47 4 48 4 48 48 Expanding Ethics (Minimum Ethical Standards should be displayed by supliers / HSBC Supplier code of Conduct) 49 Financial Markets as a Stakeholders (2 governing Theories:Efficency of Markets and Investor Confidence) 50 50 51 Role of Other Intermediaries ( Investments banks, Consultants and Auditors) 51 Protecting the Financial Markets (Directord / Officers breaking the law) 52 Insider Traiding rules (Key Test in determaining Insider trading, Examples of Insider Trading, Case: PAroo) 4 53 Owners ( UK FRC CGC (FRC 2010a: Succes of Companies and Informed Shareholders) 54 4 55-56 Rights, remedies and responsibilities (Table 4.6 OECD 2004: Shareholders rights) 4 56-57 Redress or remedy ( Shs unhappy, Unfairly treated: Example - Minority Shs) 57 4 57-58 Shareholders representation ( Table 4.7), Example of iNstitutional Shs) 58-59 59 4 60 4 60 4 61 Directors should be formally appointed, Types of Behaviour:De facto,Shadow director, type of Agents) 61 4 61 Conflict of interest (Independence od Ppereance and Independence of mind help to assess conflicts of interest) 4 62 Act in the corporation's best interest ( good faith, Honestly and without fraud or collusion) 4 63 Nominee directors ( use power for proper Purposes when nominate & appoint directors)) 4 63 Act for proper purpose ( do not abuse their power - Example Advance Bank) 4 63 Duty to retain discretion ( do not delegate to theird discretion to act as a director) 4 64 Duty of care, skill and dilligence (IN australia : SAFE HARBOUR RULE) 4 64 Insolvent trading (UK / US flexible system, Australia: stricter *Shut down the organisation) 4 65-66 4 66 Legal and ethical considerations (Conflict interest, Lack of Disclosure, Anti Trust andMOnopolies issues) 4 66 67 67 67 67 68 68 68 68 Appointment (UH FRC 2010: directors of top 350: Every year to be subject to shs vote every year as a Director) 4 68 4 69 4 69 4 69 4 70 Disqualifications on applications (5 to 20 years - civil penalties) 4 70 4 70 Question 4.1 Anglo American legal system : Commom Law and Cvil law system proved protection to Stakeholders interest? Question 4.3 Dexribe Key aspects of the pricncipal and agents problems thatexist within Corporations and result of loss of value for stakeholders queation 4.5 Withleblowing and why has become an inportant component of good corporate governance Page # 5 6 5 6 Definition (Commmision of European Communitites, CPA - CSR reporting, Australian CSR reporting practices) 5 6 The concept of accountability (Linkage between accounting and accountability, Responsabilitties) 5 7 5 8 5 8 5 8 5 8 5 8 5 8 5 9 5 9 5 10 GRI performance indicators - (Economic, social and Enviromental performance categories) 5 10 The externalities created by business organisations (Definition, Positive (benefits) or Negative (cost), qualitatives terms) 5 10 5 11-12 The importance of climate change and its relevance to CSR reporting (Carbon tax scheme) 5 13 Alternative perceptions about the responsibilities of organisations ( Organisations responsabilities/Accountabilities) 5 13-14 Milton Friedman on the role of business (shs focus - not strong advocate for Social and envirponemental reporting)) 5 14 5 14 5 15 Definition (Freeman 1984) of stakeholders, BHP, Toyota and Amcor focus on Accountability) 5 15 5 15 5 16 Motivations for embracing CSR reporting (Accountability to Stakeholders or economic focused to protect Shs value) 5 17-18 5 19 5 19 Drivers towards better CSR (BCA) "(Doing right thing" BCA is based in Managerial Reasosining rather than ethical) 5 20 Motivations for disclosing social and environment information in CSR (Deegan 2009) 5 21 5 22 5 22 Gray, Owen and Maunders (1987) - (Powerful & Influence Stakeholders in order to get support and Approval) 5 23 5 24 (Managers have a fiduciary duty to all stakeholdersrather than just Shs) 5 24 Organisational legitimacy (highly motivation for corporations to provide CSR information) 5 25 Legitimacy theory ( Community perceptions - disclousres in order to survive - non to demostrate Accountability) 5 25 The social contract (Organisations to meet requirements of both legitmacy and relevance-Schocker&Setti) 5 26 Methods to legitimise its activities (Dowling & Pfeffer 1975) 5 27 5 28 5 29-30 Other incentives tied to maximising the value of the organisation (WBC - Environmental issues ans Financial positions) 5 31 Preferential capital flow (Investments portfolis - VicSuper Sustainability report) 5 31 Brand and reputation (Social and Environmental performance - remedial actions to rebuild lost legitimacy (Islam &Deegan) 5 32 Risk management incentives(Direct&Indirect Costs, Reducing risk - climate change for transparent reporting) 5 32 5 33 5 34 Cannot answer questions related to SocIAL AND Enviromental Performance) 5 34 5 34 Enviromental Resources (Externalities(Benefits/Cost) not controlled by Entity - not considered Assets of the Entity) 5 34-35 5 36 The Stern review on the Economics of climate changes (Value of the cost of climate change overstimated) 5 36 Issues of 'reliable measurement' and 'probability' (JI and Deegan - Laibilites & Provsions realted to Externalitites difficult to measure) 5 37-38 39 5 39 5 40 Requirements embodied within the Corporations Act and accounting standards 5 40-41 Corporation Act :Directors to Provide financial details of Environmtnal performance) 5 41 Corporations act section 299 (1)(f) on environmental performance / Asic require entities to disclose financial/non financial) 5 41 5 41 AASB 137 Provisions, contigent liabilities and contigent assets -Uncertain(Entities no quantify externaliites, non measureable/reliable) 5 41 5 41 5 41-42 5 42 National Pollutant Inventory (NPI) - Howes 2001 - NPI compel's business to release information 5 43-44 Energy Efficiency Opportunities Act 2005 - required to undertake detailed energy assessment to identify oportunitites) 5 45 Other legislations aimed at motivating improvements in Social and Environmental performance) 5 45 Australia: Independent pricing and regualtion tribunal, NSW ENErgy Saving Scheme, Commonwealth Renewablwe Energy target Scheme) 5 45 European Union Emmisions Trading Scheme (Creation of Emmisions allowances) 5 46 5 47 The global reporting initiative (GRI) - G3 Guidelines, Sectors Suplements, Protocols, National Annexures) 5 47 47 5 48 5 48 5 48-49 5 50 Carbon disclosure project (Carbon emission and climate change represent significant business risk - Investment decision) 5 50 5 51 Equator Principles (determine, assess ans manage Social and Environmental risk in project financing) 5 52 5 53 Trucost (Help to identify high -risk sectors for investments / cash flows - meet environemntal reporting requirments) 5 54 5 55 Social audits and their relationship to CSR reporting (Elkington -Definintion: Assess performance in realtion to Society requirements and expectations) 5 56 5 57-58 5 59-8 5 59 5 60 CSR The zone of acceptability (Identify leading edge / Reporting Sophisitcation) 5 60 ACCA sustainability reporting awards judging criteria (VicSuper, Fuji xerox, CPA Sustainability report - Positive attributes and recommendations) 5 63-65 Integrated Reporting: IIRC missions and objectives for an integrated reporting framework, roles of IIRC 64-65 International initiatives on climate change - Institutional Framework to reduce emmision(mitigation) and adapting toclimatechange(Adaption). - Kyoto Protocolo5 66 The Copenhagen accord (interim measure to address various aspects of climate change) 5 67-68 Climate change accounting techniques (Cap-and trade method for carbon emmision - designed as a market based aproach) 5 69-70 Financial accounting treatment for Cap and Trade scheme (Fixed price and Floating-price) 5 70-71 Accounting for the levels of actual emissions (3 Categories), NCOS -set up by Australian Governement; Genuine csrbon offset) 5 72 5 73 5 74 IFAC to define EMA, IN realtion to waste - Glad Stated, Deegan: prescrition in relation to creating more refine accounts of waste) 5 75-76 76 5 77 Accountable and Transparent, Stakeholders engagement to fulfill thwir environmental and Social responsabilities 78 ISO 14001 Environemntal Management System and ISO 26000 Guidance on Social responsibility 5 78 Sustainability performance and remuneration - Amcor Sustainability Report: core values/Performance indicators 79 Question 6 Explain how any assessment undertaken by management can affect the audience of the reports Question 8 Enlightened self interest against Sustainbale development as a guiding principle Question 18 Identify 5 corporate governance policies thatcould act to enhance an organisation's social and environmental performance. Eco-balance (mass balance:Inflows-production process/outflows -finished products, organisattion to formulate measure to reduce enviromental impact(recycled, waste products, waste and emissions) Workshop 2 2 2 3 3 3 3 3 4 4 4 4 4 4 4 4 5 5 5 5 5 5 5 5 5 5 5 5 6 6 6 6 6 6 6 6 7 7 7 8 8 8 8 8 8 8 8 Workshop 9 9 9 9 9 10 10 10 10 11 11 12 12 12 12 12 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 14 14 18 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 21 21 21 21 Workshop 2 2 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 Workshop 9 9 9 9 10 10 10 10 10 10 10 10 10 10 10 10 10 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 13 13 13 13 13 13 13 13 14 14 14 14 14 14 14 14 14 14 14 14 14 15 15 15 15 15 15 15 15 15 16 16 16 16 16 16 16 16 16 16 17 17 17 17 17 17 17 17 17 17 17 17 17 18 18 18 18 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 Workshop
Level 2 Conventio nal (position & role) 2.6 Aristotle - Distribute justice Aristotle Virtue ethics 2.57 Bazerman et al. (2002) Breach of public interest due to unconscio us bias 2.16 Bedard (2001), Parker (1994), Canning & ODwyer (2003) A dual purpose: self- interest and public interest 2.67 Collins (2003) and Pierce & Sweeny (2004) Stress in the workplace 2.65 2.66 Davenport & Dellaporta s (2009) Conflict of interest associate d with confidenti ality 2.16 Dellaporta s et al. (2005) Normative theories: Should 2.48 Dellaporta s et al. (2007) Organizati onal culture 2.62 Dellportas (2005) Same as above 2.11 Doucet and Ruland (1994) 3 virtues of particular relevance for accountan ts 2.57 Hellier & Bebbingto n (2004) Limitation s of principles- based approach 2.11 Herbert Simon, Guy (1990) Satisficin g: Satisfacto ry, less than optimal 2.7 Immanuel Kant Deontolog ical theories 2.53 Jeremy Bentham & John Stuart Mill - Utilitariani sm John Rawls (1971) Justice theory 2.55 Kohlberg (1981) Theory of cognitive moral reasoning and developm ent (3 levels, 6 stages) 2.58 Langende rfer and Rockness (1990) 7 steps ethical decision- making adopted by AAA 2.71 Mathison (1988) Philosophi cal model of ethical decision- making 2.55 Ponemon and Gabhart (1993) Circumsta nces pursue the wrong course of action 2.6 Schein (2004) Relationsh ip between ethical behavior and culture 2.62 2.63 Schein (2004) Scheins six primary mechanis ms 2.64 Sim (2000), Sim and Brinkman n (2002, 2003) and Dellaporta s at el. (2007) Examine the relationshi p between leadership and culture in Scheins mechanis ms 2.63 Tuller (2000) Accountin g work environme nt 2.5 Willmott (1990) & Sikka (1989) Public Interest 2.15 Teleologic al theories 2.49 - Egoism (Ethical vs psychologi cal) Right theory 2.54 Level 1 Pre- conventio nal (self- interest) 2.59 Level 3 Post- conventio nal (society) 2.6 Level of moral reasoning in accountin g 2.61 Ethics risk- managem ent framework 2.65 Social factors: Laws, regulation s and culture 2.67-2.69 The AICPA decision tree Reading 2.3 Accounting work environment 2.5 Hellier & Bebbington (2004) Limitations of principles-based approach 2.11 Dellportas (2005) Same as above 2.11 Willmott (1990) & Sikka (1989) Public Interest 2.15 Davenport & Dellaportas (2009) Conflict of interest associated with confidentiality 2.16 Bazerman et al. (2002) Breach of public interest due to unconscious bias 2.16 Dellaportas et al. (2005) Normative theories: Should 2.48 Teleological theories 2.49 - Egoism (Ethical vs psychologi cal) 2.49 Jeremy Bentham & John Stuart Mill - Utilitariani sm 2.52 Immanuel Kant Deontological theories 2.53 Right theory 2.54 John Rawls (1971) Justice theory 2.55 Aristotle - Distribute justice 2.55 Mathison (1988) Philosophical model of ethical decision-making 2.55 Aristotle Virtue ethics 2.57 Doucet and Ruland (1994) 3 virtues of particular relevance for accountants 2.57 Kohlberg (1981) Theory of cognitive moral reasoning and development (3 levels, 6 stages) 2.58 Level 1 Pre-conventional (self-interest) 2.59 Ponemon and Gabhart (1993) Circumstances pursue the wrong course of action 2.6 Level 2 Conventional (position & role) 2.6 Level 3 Post-conventional (society) 2.6 Level of moral reasoning in accounting 2.61 Dellaportas et al. (2007) Organizational culture 2.62 Schein (2004) Relationship between ethical behavior and culture 2.62 2.63 Sim (2000), Sim and Brinkmann (2002, 2003) and Dellaportas at el. (2007) Examine the relationship between leadership and culture in Scheins mechanisms 2.63 Schein (2004) Scheins six primary mechanisms 2.64 Ethics risk-management framework 2.65 Collins (2003) and Pierce & Sweeny (2004) Stress in the workplace 2.65 2.66 Bedard (2001), Parker (1994), Canning & ODwyer (2003) A dual purpose: self-interest and public interest 2.67 Social factors: Laws, regulations and culture 2.67-2.69 Herbert Simon, Guy (1990) Satisficing: Satisfactory, less than optimal 2.7 Langenderfer and Rockness (1990) 7 steps ethical decision-making adopted by AAA 2.71 The AICPA decision tree Reading 2.3 Annual Report of FRC (2010) IFAC (2003) Module 2 Tuller (2000) Hellier & Bebbington (2004) Dellportas (2005) Willmott (1990) & Sikka (1989) Davenport & Dellaportas (2009) Bazerman et al. (2002) Dellaportas et al. (2005) Jeremy Bentham & John Stuart Mill Immanuel Kant John Rawls (1971) Aristotle Mathison (1988) Aristotle Doucet and Ruland (1994) Kohlberg (1981) Ponemon and Gabhart (1993)
Dellaportas et al. (2007) Schein (2004) Sim (2000), Sim and Brinkmann (2002, 2003) and Dellaportas at el. (2007) Schein (2004) Collins (2003) and Pierce & Sweeny (2004) Bedard (2001), Parker (1994), Canning & ODwyer (2003) Herbert Simon, Guy (1990) Langenderfer and Rockness (1990) Module 3 APEC (2008) Bosch (1995) Hampel report (CCG 1998) CalPERS (2011) Calbury Report (UK) Bosch (1995) Roger CJ (AWA Ltd v. Daniels (1992)) OECD (2004) ASX (2010) Sarbanes-Oxley Act Percy (1995) & Bosch (1995) AASB (2001) COSOs Internal Control Integrated Framework Kaplan and Norton (1992) PAIB (2004), CIMA ASIC (2006) Milton Friedman Fraudulent Financial Report (1987-97) Sarbanes-Oxley Act (2002) Business Round Table (1997,2002, 2005) Ramsay Report (2002) Corporate Law Economic Reform Program Act (2004) Harris (1997) Uhrig (2003) OECD Principles of Corporate Governance (2004) UK Financial Reporting Council Corporate Governance Code ASX Corporate Governance Code and Recommendations UK Stewardship Code (FRC 2010b) The Blue Book (IFSA 2009) Nestor & Thompson (2000) Soros (1998) La Porta, Lopez-de-Silanes & Schleifer (1999) Weil, Gotshal & Manges (2002) IMF, WB, ADB Yasui (1999) IFAC (PAIB 2004) Module 4 Edward Freeman (1984) Monks & Minow (2008) Denning LJ (1957) Corporation Act (2001) Jensen and Meckling (1976) Malaysian Companies Act (1965) Jensen and Meckling (1976) OSHA (2010) Sarbanes-Oxley Act (2002), Corporation Act (2001) Fels (1999) HSBC (2009) Module 5 The Social Responsibility of Corporations (2006), Commission of European Communities (2001) Grey, Owen and Maunders (1987) Grey, Owen and Adams (1996) Sustainability Reporting Guidelines (GRI 2006) 1 2 3 5.8 5.9 5.9 Bebbington and Gray (1992, 1997) Woolworths Ltd (2009) Milton Friedman (1962) Mathews (1993) Merrick Dodd Adolf Berle Brundtland (1987) Parliamentary Joint Committee on Corporations and Financial Services (PJCCFS 2006) BCA (2005) Deegan (2009) Gray, Owen, Adams (1996) Deegan (2009) Dowling & Pfeffer (1975) Lindblom (1994) Patten (1992) Deegan and Rankin (1996), Deegan, Rankin & Tobin (2002), Islam and Deegan (2010) World Business Council (WBC) VicSuper (2004) Lawlor (2002); Islam & Deegan (2008) Mansley (2002) Perks (1993) Ji and Deegan (2011) Yankelovich (1972) 1 2 a. 3 4 5 6 5.4 5.41 5.42 5.43 5.44 5.45 5.46 GRI (2010) CDP (2009) AccountAbility (2007) EPs (2006a) GHG Protocol Trucost (2010) Eco-Balance The Body Shop (2007), Elkington (1997) SA8000 (SAI 2008) VicSuper and Fuji Xeroxs Sustainability Report (2009) CPA Australia Sustainable Report (2010) IIRC (2010) Deegan (2003) ISO 14000, ISO 14001, ISO 26000, ISO 9001 Index Beard (1994) Friedman and Lyne (2001) Dimnik and Felton (2006) Smith and Briggs (1999) Albrecht and Sack (2000) Coate et al. (2003) Jeacle (2008) Biddle (2006) Macquarie Dictionary American Accounting Association (AAA) CPA Australia Lonergan (2009, p.24) Parker et al. (1989) Millers (1994) Carnegie and Napier (1996) Blanthorne et al. (2005) IFAC (2005) IFAC (2010) APESB (2010) Bertrand Russell (1955) Macquarie Dictionary Oxford Dictionary Carnegie (2009) OECD (2004) IFAC (2004) Greenwood (1957) Carey (1969), Buckley & Buckley (1974) Wilensky (1964) Buckley (1978) Becker (1982) Schon (1983) West (2003) Allan (2006) West (2003) Larson (1977) Abbott (1988) Lee (1995) Saravanamuthu (2004) & Kelly (1985) Robson and Cooper (1990) & Willmott Lehman (2006) Carnegie and Napier (2010) Brewster (2003) Chambers (1973) Green (1991) & Clarke (2003) he Australian & Murdoch (2010) Sikka (2009) Annual Report of FRC (2010) IFAC (2003) Module 2 Tuller (2000) Hellier & Bebbington (2004) Dellportas (2005) Willmott (1990) & Sikka (1989) Davenport & Dellaportas (2009) Bazerman et al. (2002) Dellaportas et al. (2005) Jeremy Bentham & John Stuart Mill Immanuel Kant John Rawls (1971) Aristotle Mathison (1988) Aristotle Doucet and Ruland (1994) Kohlberg (1981) Ponemon and Gabhart (1993)
Dellaportas et al. (2007) Schein (2004) Sim (2000), Sim and Brinkmann (2002, 2003) and Dellaportas at el. (2007) Schein (2004) Collins (2003) and Pierce & Sweeny (2004) Bedard (2001), Parker (1994), Canning & ODwyer (2003) Herbert Simon, Guy (1990) Langenderfer and Rockness (1990) Module 3 APEC (2008) Bosch (1995) Hampel report (CCG 1998) CalPERS (2011) Calbury Report (UK) Bosch (1995) Roger CJ (AWA Ltd v. Daniels (1992)) OECD (2004) ASX (2010) Sarbanes-Oxley Act Percy (1995) & Bosch (1995) AASB (2001) COSOs Internal Control Integrated Framework Kaplan and Norton (1992) PAIB (2004), CIMA ASIC (2006) Milton Friedman Fraudulent Financial Report (1987-97) Sarbanes-Oxley Act (2002) Business Round Table (1997,2002, 2005) Ramsay Report (2002) Corporate Law Economic Reform Program Act (2004) Harris (1997) Uhrig (2003) OECD Principles of Corporate Governance (2004) UK Financial Reporting Council Corporate Governance Code ASX Corporate Governance Code and Recommendations UK Stewardship Code (FRC 2010b) The Blue Book (IFSA 2009) Nestor & Thompson (2000) Soros (1998) La Porta, Lopez-de-Silanes & Schleifer (1999) Weil, Gotshal & Manges (2002) IMF, WB, ADB Yasui (1999) IFAC (PAIB 2004) Module 4 Edward Freeman (1984) Monks & Minow (2008) Denning LJ (1957) Corporation Act (2001) Jensen and Meckling (1976) Malaysian Companies Act (1965) Jensen and Meckling (1976) OSHA (2010) Sarbanes-Oxley Act (2002), Corporation Act (2001) Fels (1999) HSBC (2009) Module 5 The Social Responsibility of Corporations (2006), Commission of European Communities (2001) Grey, Owen and Maunders (1987) Grey, Owen and Adams (1996) Sustainability Reporting Guidelines (GRI 2006) 1 2 3 5.8 5.9 5.9 Bebbington and Gray (1992, 1997) Woolworths Ltd (2009) Milton Friedman (1962) Mathews (1993) Merrick Dodd Adolf Berle Brundtland (1987) Parliamentary Joint Committee on Corporations and Financial Services (PJCCFS 2006) BCA (2005) Deegan (2009) Gray, Owen, Adams (1996) Deegan (2009) Dowling & Pfeffer (1975) Lindblom (1994) Patten (1992) Deegan and Rankin (1996), Deegan, Rankin & Tobin (2002), Islam and Deegan (2010) World Business Council (WBC) VicSuper (2004) Lawlor (2002); Islam & Deegan (2008) Mansley (2002) Perks (1993) Ji and Deegan (2011) Yankelovich (1972) 1 2 a. 3 4 5 6 5.4 5.41 5.42 5.43 5.44 5.45 5.46 GRI (2010) CDP (2009) AccountAbility (2007) EPs (2006a) GHG Protocol Trucost (2010) Eco-Balance The Body Shop (2007), Elkington (1997) SA8000 (SAI 2008) VicSuper and Fuji Xeroxs Sustainability Report (2009) CPA Australia Sustainable Report (2010) IIRC (2010) Deegan (2003) ISO 14000, ISO 14001, ISO 26000, ISO 9001 Topics Accounting Stereotypes Accounting Stereotypes (Bean counter) Accounting Stereotypes (5) Accounting Stereotypes observation Accounting Stereotypes: Scorekeepers Accounting Stereotypes Accounting Stereotypes: Colourful Accountant Value Creation Accounting Definition Accounting Definition Accounting Definition & Service Ideal Accounting: Social Impacts Accounting: Social Impacts: Theoretical Analysis Accounting: Wider Social Impacts Accounting: Social Intermediary Technical, Soft Skills: Career Perspectives Professional Accountants in Business Accounting: SMEs Professional Ethics Situational Ethics Govern Definition Govern and Governance Definition Governance Governance Enterprise Governance Key attributes of a profession Key attributes of a profession Service ideal Public Interest Professional judgment argument Professionals Regulatory fiat: importance of professionals Comments on HIH, and Arthur Andersen Evolution of accounting profession Professionalisation Comments on Larsons theory & power literature Self-interest of accountants Gold collarism: knowledge worker Relationship between accounting & social Quantify the above relationship Ideals of professionalism &deprofessionalisation Loss of trust in the accounting profession Lack of action to put its affair in order Many accounting issues from 80s is unsolved Failures by accountants Views on the nature of basic auditing model Requirements on independence of auditors Rebuilding public confidence on Financial Report Accounting work environment Limitations of principles-based approach Same as above Public Interest Conflict of interest associated with confidentiality Breach of public interest due to unconscious bias Normative theories: Should Teleological theories - - Deontological theories Right theory Justice theory - Philosophical model of ethical decision-making Virtue ethics 3 virtues of particular relevance for accountants Theory of cognitive moral reasoning and development (3 levels, 6 stages) Level 1 Pre-conventional (self-interest) Circumstances pursue the wrong course of action Level 2 Conventional (position & role) Level 3 Post-conventional (society) Level of moral reasoning in accounting Organizational culture Relationship between ethical behavior and culture Examine the relationship between leadership and culture in Scheins mechanisms Scheins six primary mechanisms Ethics risk-management framework Stress in the workplace A dual purpose: self-interest and public interest Social factors: Laws, regulations and culture Satisficing: Satisfactory, less than optimal 7 steps ethical decision-making adopted by AAA The AICPA decision tree Key factors driving the needs for better corporate governance internationally Value of corporate governance in APEC Rights and obligations of shareholders Issues arise for institutional shareholders Views on corporate governance BoD should have schedule reserved for decisions Board functions Conclusions on the role of the boards Board chair (chairman) and role of CEO Independent vs Non-independent directors Structure of remuneration committees Responsibilities of audit committees Roles of audit committees Objectives of audit committees Benefits of audit committees Limitations of audit committees 5 interrelated components to mitigate the risks and to achieve the organizations objectives The Balanced Scorecard Strategic Scorecards Economic Value Added (EVA) Traits of a sound regulatory system Shareholders wealth maximization Findings on fraudulent reporting by the SEC Guidelines for financial reporting Statement on corporate governance Requirements of independence of auditors Audit reform and corporate disclosures Summary of reports on corporate governance Guiding principles for more effective boards Opportunities for improvements in corporate governance in public sectors 6 core principles 8 core principles Codes for institutional investors Effective guidances for investment managers Market-based systems Characteristics of market-based systems Reasons for market collapse Relationship-based systems European Long-term stable relationships between group of insiders and the company Different political, legal, regulatory structures Relationship-based systems Asian Reform of corporate governance Japan Family-controlled companies and business networks Common failure factors Stakeholder theory Other issues arises from stakeholder theory Why we need to understand agency theory Who run the corporation Obligations of the officer Define agency and central problem Delegation of power of BoD Assumptions underlying agency theory Whistleblower protection Whistleblower provision International competition legislation and regulators Abuse of market power (eg. Predatory pricing) Mergers and Acquisitions Cartel conducts (Output restrictions, allocating customers & suppliers or territories, Bid-rigging, Price-fixing) Unilateral restrictions on supply (exclusive dealing) Resale price maintenance Compliance program Consumer protection legislation Puffery: misleading in advertising Unconscionable conduct HSBCs supplier code of conduct Insiders trading Types of corporations Board structures and directors responsibilities Corporate Social Responsibility (CSR) definitions Accountability: concepts and responsibilities Provide an account of its social and environmental performance Guidelines on reporting: Social reporting Environmental reporting Sustainability reporting Externality and implications for reporting Sustainable Cost Climate change and CSR reporting Social responsibility Conditions for existence of organization by communities Social contract perspective Shareholder primacy perspective Should not compromise the ability of future generations to satisfy their own needs Enlightened self-interest Drivers towards greater CSR Motivations for disclosing social and environmental information in CSR report Stakeholder theory Managerial branch Stakeholder theory Ethical branch Legitimacy theory Methods to legitimize its activities Courses of action to obtain, maintain, or repair legitimacy Empirical evidence of legitimacy theory Investigate the social and environmental disclosure to support the legitimacy theory Environmental issues impacts on profitability Long-term success link with environmental, social and economic performance Brand and reputation Risk management incentives: climate change Limitations of traditional financial reporting Present value vs. renewable energy Issues of reliable measurement and probability Measurement issue: 4 steps: The entity assumption Regulations for CSR reporting Corporation Acts National Greenhouse and Energy Reporting Act (NGER 2007) NGER Threshold National Pollutant Inventory (NPI) Energy Efficiency Opportunities Act 2006 Other legislation European Union Emissions Trading Scheme (ETS) Sustainability Reporting Guidelines (2006) Carbon Disclosure Project (CDP) AccountAbility AA1000: helping organizations become more accountable, responsible, and sustainable Equator Principles: a voluntary set of standards for determining, assessing and managing social and environmental Green House Gas Protocol (Kyoto Protocol): most widely used international accounting tools for quantifying green Trucost: assisting organizations, investors, governments in understanding the environmental impacts of business Eco-balance or Mass-balance Social Audit Requirements of audit of site performance ACCA Sustainability Report Awards Integrated Reporting International initiatives on climate change Environmental management accounting 14001 (Environmental management), 26000 (voluntary guidance standard), 9001 (quality management) Content P. 1.6 1.6 1.6 1.6 1.6 1.6 1.7 1.7 1.8 1.8 1.9 1.1 1.11 1.11 1.12 1.14 1.16 1.19-1.22 1.25 1.26 1.27 1.27 1.27 1.28 1.28 1.32 1.32 1.33 1.33 1.36 1.36 1.37 1.38 1.38 1.39 1.39-1.40 1.4 1.4 1.41 1.41 1.41 1.42 1.42 1.43 1.43 1.43 1.44 1.45 2.5 2.11 2.11 2.15 2.16 2.16 2.48 2.49 Egoism (Ethical vs psychological) 2.49 Utilitarianism 2.52 2.53 2.54 2.55 Distribute justice 2.55 2.55 2.57 2.57 2.58 2.59 2.6 2.6 2.6 2.61 2.62 2.62 2.63 2.63 2.64 2.65 2.65 2.66 2.67 2.67-2.69 2.7 2.71 Reading 2.3 3.5 3.6 3.9 3.11 3.12 3.12 3.13 3.13 3.16 3.18 3.19 3.21 3.21 3.21 3.22 3.22 3.26 3.28 3.28 3.29 3.3 3.31 3.35 3.35 3.36 3.36 3.37 3.38 3.39 3.43 3.43 3.44 3.45-3.51 3.54-3.55 3.56-3.64 3.64-3.66 3.66-3.68 3.69 3.7 3.71 3.72 3.72 3.37 3.75 3.76 3.76 3.77 3.78 3.87 4.4 4.6 4.6 4.7 4.7 4.8 4.9 4.1 4.19, 4.23 4.24 4.32 4.33 4.34 4.35 4.37 4.37 4.41 4.44 4.45 4.46 4.49 4.52 4.6 4.61 4.70 5.6 5.7 5.8 5.1 5.12 5.13 5.14 5.14 5.16 5.16 5.17 5.19 5.2 5.21 5.22 5.24 5.25 5.26 5.27 5.29 5.29 5.30 5.31 5.32 5.32 5.33 5.33-5.36 5.36 5.37-5.38 5.39 5.39 5.48 5.5 5.51 5.52 5.53 5.54 5.55 5.57 5.59 5.62 5.63 5.65 5.66 5.73 5.74 5.76 5.78