FNSACC506 Implement Internal Control

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FNSACC506 Implement Internal Control

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FNSACC506 Implement Internal Control

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Course Code: FNSACC506
University: Australian Harbour International College

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Country: Australia

Questions:
write a report on the following:1. Discuss how the procedure can be monitored to ensure it is effective – i.e. any relevant errors should be well documented by staff2. Comment on any variations of corporate governance requirements you have discovered, and give reasons why these variations may exist
Answers:

Introduction
In the recent two decades, the prominence of corporate governance has increased in the business environment of Australia. The recent cases of corporate collapse and the financial crisis have forced the government, company and shareholder to push for more robust corporate governance procedure. In Australia and the corporate governance has developed in an Ad Hoc manner. However, the companies have embraced the evolution in the practice of the corporate governance. This report discusses and reviews the important features of the corporate governance requirements as applicable in Australia. This report also discusses the principles of the corporate governance and its applicability to the company. The report also reviews the internal control procedure of the company comprehensively.  
Review of the applicable corporate Governance requirements in Australia
In Australia, the corporate governance is not only mere compliance of the regulations. The corporate governance also includes certain voluntary elements. The corporate governance in Australia can be classified into three elements the legislative requirement as provided under the corporations act 2001, the rules relating corporate governance provided by Australian security Exchange Limited and guidelines that are not binding that are issued by Australian security exchange in a corporate governance report commonly known as a ASX principles. Many believe that a good system of corporate governance will help in improving the performance of the company. That means the corporate governance is something beyond than just a simple matter of legal compliance (Cheng et al. 2013). There are certain difficulties in proving that good corporate governance will enhance the performance of the company. However, it is relatively certain that bad corporate governance practice can result in poor performance of the company. The key feature of the current corporate governance that is applicable in Australia are as follows:

There are extensive regulations and directors are personally liable; and
There is a shift towards the principle-based system of corporate governance;

The Australian courts have taken into account the standards of corporate governance in determining the scope of the duty of directors. In the case of Australian Securities and Investments Commission v Rich (2009) it was held by the court that it was the responsibility of the board to ensure that independent directors should be responsible for the financial and Audit committee as well as internal reviews. In this case, the corporate governance requirement are applied to the BD Corp creative college. The corporate governance is relevant for the company because it helps in achieving the objective through:

Proper business and strategic planning;
Proper management of risk;
Financial reporting and Management;
Planning and control of human resources; and
Compliance and accountability of the system.

Corporate Governance principles
The Australian Stock Exchange in 2002 formed and developed the corporate governance Council. It was formed for developing and delivering a framework for corporate governance that could provide guidance to all the listed companies and other companies in Australia. The council has provided eight corporate governance principles that are discussed below:
Principle 1:
The first principle used to lay a solid foundation for the management and its oversight. In this the function that are reserved to the board and that are delegated to the management are formalized and disclosed.
Principle 2:
The second principle is to structure the board so that it can add value.It is necessary that independent directors should be majority in the board of directors. The independent director should be chairperson of the board. The same person should not be responsible for acting as a role of chairperson and the chief executive officer. The principal provides that the board is required to establish a nomination committee.
Principle 3:
The third principle is to promote the ethical and responsible decision-making. The directors and other responsible officers should establish a code of conduct that is necessary for maintaining the confidence in the integrity of the company. The individuals should be responsible for investigation and the reporting of  the unethical practices.
Principle 4:
The fourth principle is to safeguarding the integrity of the financial reporting. The chief financial officer or the executive officer should state that the financial report provide a true and fair view of the financial performance of the company. It is necessary that the board of directors should establish the audit committee. In the audit, committee there should only be non-executive directors and the majority of the directors are independent. The principle also provides that the audit committee should have a formal charter.
Principle 5:
The fifth principle provides that the disclosure should be balanced and timely. The written policies and procedures should be established so that the ASX listing rules is provided in order to ensure accountability at the level of senior management.
Principle 6:
The rights of the shareholders should be respected. The strategy should be designed so that the communication can be effectively conducted with the shareholders and the participation in the general meeting is encouraged. The request shall be made so that the external auditor can attend the general meeting and is available for the questioning in the general meetings.
Principle 7:
The risk should be recognized and managed. The board committee is required to be established for the oversight of risk and management.
Principle 8:
The eighth principle is to encourage the increased efficiency in performance. The process of the performance of the board, committee and directors should be disclosed.
Practical Application
The application of the corporate governance principles will ensure that the company can function within the oversight of the management. The corporate governance principle will ensure that the value is added to the structure of the board. It will help the company in promoting the ethical and responsible decision-making of the company.  It will further ensure that integrity is maintained in the financial reporting of the organization. The principle will ensure that the company will make timely and balanced disclosure.  The company by the application of the corporate governance principle will ensure that the rights of the shareholders are respected. It can be said that the application of the corporate governance will ensure that the performance of the company is enhanced. It will ensure that the company remunerates responsibly and fairly. This will help to recognize the interest of the stakeholders.
Information relating to application of corporate governance from different sources
ATO
The corporate governance includes rules, systems, relationships and process that are useful in controlling the business. This helps in ensuring that the governance has a level of transparency, accountability and integrity. The adequacy of the corporate governance measures depends on the nature and size of the business. The tax governance is a subset of the corporate governance. This includes a framework that helps in identifying, assessing and managing the risk of the tax and superannuation. The effective tax governance will help the company to gain a level of confidence that the right amount of tax is paid. The effectiveness of tax governance helps the ATO to have confidence that the tax affairs of the company are managed effectively and is in within the control of the organization. The effective tax governance provides certain practical benefit to the business. The benefits are:

It helps the business in planning and decision-making so that surprise can be avoided.
It helps in building the capacity of the management and provides assurances so that the owners of the business can optimize the performance of the business.
This helps in ensuring that the frauds of the business are avoided.
This ensures that there is compliance with the laws and regulation that are applicable to the business.
This helps in ensuring the accuracy of the financial report and the integrity of the record of the business.

There are seven principles of effective tax governance that are discussed below:

The Accountability and the oversight of the management: The responsibility and the roles are clearly categorized so that there is an increased accountability and oversight of the management.
The risk recognition: The process of appropriate control will help in identifying, assessing and mitigating the risk related to tax. The identification of the tax risk helps to ensure that the business develops an appropriate plan so that the risk is mitigated.
The seeking of advice: The procedures for obtaining the advice of the tax should be clearly defined. The published guideline of the ATO should help in assessment of tax.
The reporting integrity: The managers and owners are responsible for the reviewing the financial record of the business. They also review that the tax report provides a true and fair view of the business. It should also be ensured that the performances of the tax position are in line with the tax law.
The productive and professional relationship: There should be a transparent and professional working relationship with the Australian taxation office.
The timely lodging and payment: The effectiveness of tax governance is demonstrated by the satisfaction of the obligation and payment. There are time frame for the lodgment and payment of tax.
The responsible and ethical behavior: It is necessary to act responsibly and ethically. The duty should be performed with honesty and integrity.

Professional body
There are different principles of the corporate governance that are applied by the professional bodies. The corporate governance principle for the corporate secretaries includes certain core principles that should be included in the good framework. The corporate governance principles adopted by the organization should be adjusted for the following:

The difference in the cultural environment;
The operation or the type of the business;
The resources related to human and financial organization;
The commercial risk associated with the organization;

The Corporate governance principle adopted by the professional organization of the company secretaries are:

Accountability;
Integrity;
Stewardship;
Separation of the management and the board;
Transparency;
The environment and the corporate governance responsibility;

The other professional organization also adopts the corporate governance principle within the professional body.  
Financial Information Systems
In the early 2000, the corporate scandals have demonstrated that the auditing and accounting failures along with the abuse of the power of the management has created major problems. It has been seen that there is a relationship between the corporate governance and the system of accounting information. The corporate governance has helped to enhance the functioning of the business and the organization (Yin et al. 2014). The analyses conducted by various bodies have shown that there is a positive relationship between the financial reporting, bookkeeping and budgeting with the excising corporate governance. The manager should establish the procedure for internal reporting so that the manager can implement the internal control procedure.
Australia Security exchange commission
The ASIC engages with the issues related to the corporate governance by the publications issued by the commission. The guidance issued by the publication is based on the issues related to the practical application on the issues of the corporate governance.
Review of the internal control procedure
The internal control procedure of the organization is evaluated based on the principles of the corporate governance. The financial policies and manual of the organization is scrutinized so that the existing policies of the organization can be understood. In order to ensue that there is internal control of the organization so that the reliability and accuracy of the financial data can be increased. The accounting policy of the company ensures that there is a separation of functions and roles of different staffs.  In order to ensure that the accounting information is correct the internal control policy adopted by the company is to reconcile and review the financial record of the organization. The internal control policy adopted by the organization includes detection and the correction of the items in an irregular manner. The adopted internal control of the company ensures that the financial governance of the company is prudent so that the risk faced by the company can be contained at the acceptable level. On analyzing the accounting, policy of the company, then it can be said that the company has adopted the adequate internal control policy to ensure that all the principles of the corporate governance is adopted.
Conclusion
Based on the above discussion it can be said that the corporate governance principles plays a very important role in the success of the organization. On analyzing the current accounting policies adopted by the company it can be said that the company has implemented the corporate governance principles and the internal control procedure so that the financial reporting of the company is accurate. 
Reference
Cheng, M., Dhaliwal, D. and Zhang, Y., 2013. Does investment efficiency improve after the disclosure of material weaknesses in internal control over financial reporting?. Journal of Accounting and Economics, 56(1), pp.1-18.
Yin, S., Luo, H. and Ding, S.X., 2014. Real-time implementation of fault-tolerant control systems with performance optimization. IEEE Transactions on Industrial Electronics, 61(5), pp.2402-2411.

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