Corporate Governance, Internal Audit, and Key Performance Indicator
Question 1: Discuss the Ethical Corporate Governance concepts.
Ethical Corporate Governance is about the policies and processes which a company develops to cater to the problems related to the conducting and administration of the day-to-day business. The main aim of any company is to create a service or product for the purpose of generating profits; however, this has to be checked constantly in order to control any exploitation and reduce the possibility of any unethical behavior (International Charte, 2019).
Question 2: Explain how a company’s board members can demonstrate that they are committed to the ethical standards.
Corporate Governance provides the basis for the companies to define their priorities by making the decisions that are aligned with the social, economic, regulatory and market environment. The roots of Corporate Governance are based on ethical behavior, and this can only be shown by taking the decision in the administration of the business which reflects ethical principles. The Board of directors faces the challenge of aligning the management and board interests with the stakeholders. They are required to be responsible for their duties and respond to accountability and transparency. The board is responsible for providing oversight and foresight to the management. If a board needs to demonstrate that they are committed to the ethical principles, then it should reflect it in their decisions and foresight given to the management (Price, 2018).
Question 3: Outline at least two key management processes that need to be inherent in a company to support effective corporate governance.
The management processes are needed to be aligned with the corporate governance framework to make it work. The management processes which should be inherent to the company to make the corporate governance effective could be the management processes of leading and controlling. Leading the management process through which the executive of the company leads it by providing inspiration and guidance. Other than this, the management process of controlling should also be inherent to the company as it can help in controlling the deviation from the plan and aid in controlling the results before it is too late. These two management processes can aid a company to become more effective in terms of corporate governance (Emeagwali, 2017).
Question 4: Explain the purpose of keeping employees’ records and 5 examples of employee records that must be kept.
The purpose of keeping the employee records is to aid in recruitment purposes, save time while performing the administrative duties, and identify the gaps in the skills of the employees. The organized data on the employees helps the human resource department during the inspection period. Furthermore, there are several other benefits of keeping the records of the employees as well. This includes the benefit of preventing any potential litigation, the assurance of competency, and continued networking of the company. The five types of data that the companies should keep a record of their employees include the personal data, the contact details, the details of the employment in the company, past employment, and the specifications of the job (Pawar, 2018).
Question 5: Explain why an internal audit is useful in an organization and how audit reports, assessments and recommendations can help improve Corporate Governance processes and objectives.
Internal Audit works to provide assurance that the internal management, risk management, control processes, and governance are working efficiently. It is important to have an internal auditor in the company as its recommendations and reports aid in providing the company with objective insight and an independent view of the company’s operations. Furthermore, it aids in improving operational efficiency as well. The constant review of the processes and the procedures the company is following, the internal audit provides assurance of operational efficiency. The internal audit also aids in the assisting of the stakeholders in the identification of the risks and its systematic assessment. The internal audit also aids in the assessment of the control processes which aid in the operational efficiency. Compliance with the laws and regulations is also made possible by the internal audit (Ridley, 2008).
Question 6: You have received a Qualified Auditor report for the company you work for. Auditors have reported the contravention about the director’s superannuation not being paid for the past 2 years. Prepare a list of suggestions to management to rectify this contravention. Your answer should focus on the rectification to the internal control system to prevent this contravention in the future.
The wages paid to the director who is employed are also liable to guarantee the same law for the superannuation as other employees. Superannuation thus applies in this situation. However, as a member of the executive committee, the payments for the responsibilities performed would not be considered as ordinary time earnings, and therefore it is not liable to superannuation (Leow, 2010).
Question 7: Conduct research on the AASB website (AASB 116) for the disclosure requirements on depreciating assets. Explain what these are.
The AASB website, when searched for the Disclosures related to the depreciating assets directed to the document on depreciation. The resultant document showed that in the statement of the financial position, the accumulated depreciation needs to be shown as a deduction of the asset to which it is linked. Other than this, the needed disclosed information for the depreciable assets includes the depreciation methods that are used, the depreciation rates used, the useful lives used, the gross amount of the depreciable assets, and the total amount of the allocated depreciation (Australian Accounting Standard, 1997).
Question 8: List two common methods of depreciating assets.
The two most commonly used methods of depreciation of assets are the straight-line method and the double-declining balance method. The straight-line method is used for the calculation of the depreciation expense by using the same expense amount over the useful life of the asset. The double-declining method is used when it is needed to reflect that the earlier years of the asset are more productive and for this reason more depreciation expense is expended during the earlier years (Johal et al., 2014).
Question 9: Explain performance indicators and key results areas, identifying the difference.
The Key Performance Indicators are the abbreviations for the KPIs while the KRA stands in the Key Results Area. The KPIs are the quantifiable metric for any of the defined and stated objectives. It shows the factors which consequently lead to the success of the company. The KRAs are the areas which need an exceptional performance to remain competitive in the market. The KRAs are qualitative while the KPIs is quantitative in nature. The KRAs defines the scope of the product or takes while the KPIs shows the success rate towards any defined goals (Niven & Lamorte, 2016).
Question 10: Explain the importance of using performance Indicators and key results areas to monitor corporate governance activities. To illustrate your answer, identify at least two examples of performance indicators and two examples of key results areas that can be used to monitor corporate governance activities.
The use of the KPIs and KRAs in the company aids in the achievement of effective corporate governance. The well-defined KPIs and KRAs would help show the position of the business where it is currently standing and where it needs to go. The KPIs help in translating the business into operational and manageable actions which the management can monitor and control. A good example of KPIs would be the Return on Investment and Customer Satisfaction Level. The Return on Investment would yield the information on the level of return generated from the investment made in the business while the other KPI of customer satisfaction can be used for assessing the service or product efficiency and quality because of the customers. Similarly, the KRAs can be the Innovation and Customer Focus, and this defines the area for achieving the results or objectives of new product services and efficient customer service (Hendrikse & Hendrikse, 2003).
Reference:
Australian Accounting Standard, 1997. Depreciation. [Online] Available at: https://www.aasb.gov.au/admin/file/content102/c3/AAS04_8-97.pdf [Accessed 30 August 2019].
Emeagwali, L., 2017. Corporate Governance and Strategic Decision Making. Books on Demand.
Hendrikse, J.W. & Hendrikse, L., 2003. Business Governance Handbook: Principles and Practice, Volume 1. Juta and Company Ltd.
International Charte, 2019. Ethical Corporate Governance: Why does it matter? [Online] Available at: http://www.icharter.org/articles/ethical_governance.html [Accessed 30 August 2019].
Johal, P., Vickerstaff, B. & McAuliffe, E., 2014. Unlocking Financial Accounting. Routledge.
Leow, J., 2010. Australian Master Superannuation Guide 2010/11. CCH Australia Limited.
Niven, P.R. & Lamorte, B., 2016. Objectives and Key Results: Driving Focus, Alignment, and Engagement with OKRs. John Wiley & Sons.
Pawar, Y., 2018. 8 employee records that need to be maintained diligently. [Online] Available at: https://upraise.io/blog/employers-maintain-employee-records/ [Accessed 30 August 2019].
Price, N.J., 2018. The Role of the Board of Directors in Corporate Governance. [Online] Available at: https://insights.diligent.com/corporate-governance/the-role-of-the-board-of-directors-in-corporate-governance/ [Accessed 30 August 2019].
Ridley, J., 2008. Cutting Edge Internal Auditing. John Wiley & Sons.
