Acctg 3116 Module 2 -Corporate Goverance Resposibiities and Accountabilities PDF

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Acctg 3116 - Governance, Business Ethics, Risk Management and Internal ControlModule 2 - Corporate Governance Responsibilities and AccountabilitiesThe essence of any system of good corporate governance is to allow the board and management the freedom to drive their organization forward and to exerci...

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Acctg 3116 -

Governance, Business Ethics, Risk Management and Internal Control

Module 2 -

Corporate Governance Responsibilities and Accountabilities

The essence of any system of good corporate governance is to allow the board and management the freedom to drive their organization forward and to exercise that freedom within a framework of effective accountability Relationship between Shareholders/Owner(s) and Others Stakeholders in a corporation Governance starts with the shareholders/owners delegating responsibilities through and elected boad of directors to management and , in turn, to operating units with oversight and assistance from internal auditors. The board of directors and its audit committee oversee management and, in that role are expected to protect the shareholders’ rights. However, it is important to recognize that management is part of the governance framework; management can influence who sits on the board and the audit committee as well as other governance controls that might be put into place. In return to the responsibilities (and power) given to management and the board, governance demands accountability back through the system to the shareholders. However, the accountabilities do not extend only the shareholders. Companies also have responsibiities to other stakeholders. Stakeholders can be anyone who is influenced, whether directly or indirectly, by the actions of a company. Management and board have responsibilities to act within the laws of society and to meet various requirements of creditors, employees and the stakeholders.

https://www.mitsubishielectric.com/en/investors/management/corp_governance/index.page

A broad group of stakeholders has an interest in the quality of corporate governance because it has a relationship to economic performance and the quality of financial reporting. While shareholders/owners delegate responsibilities to various parties within the corporation, they also require accountability as to how well the resources that have been entrusted to management and the board have been used. For example, the owners wants accountability on:     

Financial performance Financial transparency Stewardship Quality of internal control Composition of the BODs and the nature of its activities.

The owners want disclosures from management that are accurate and objectively verifiable. Management has the responsibility to provide financial reports. From a financial reporting perspective, it is management responsibility to:  Choose which accounting principles best for the company transactions.  Implement a system of internal control that assures completeness and accuracy in financial reports.  Ensure that financial statements contains accurate and complete disclosure. Parties Involved in Corporate Governance: Their Respective Broad Role and Specific Responsibilities Party 1. Shareholders

Overview of Responsibilities Broad Role Provide effective oversight through election of Board members, approval of major initiatives Such as buying and selling of stock, annual reports on management compensation, from the board

2. Board of Directors (BODs)

Broad Role The major representative of stockholders to ensure that the organization is run accordingly to the organization’s charter and that there is proper accountability. Specific activities in terms of 1. Overall Operations 2. Performance 3. Compliance/LegalComformance

3. Non-Executive or Independent Directors

Broad Role The same as the broad role of the entire BODs

4. Management

Broad Role Operations and accountability. Manage the organization effectively, provide accurate and timely reports to shareholders and other Stakeholders

5. Audit Committee of the BODs

6. Regulators A. Board of Accountancy

B. Securities and Exchange Commission (SEC)

Broad Role Provide oversight of the internal and external audit function and the process of preparing annual financial statements as well as public reports on internal control.

Broad Role Set accounting an auditing standards dictating underlying financial reporting and auditing concepts; set the expectations of audit quality and accounting quality Broad Role Ensure the accuracy, timeliness and fairness of public reporting of financial and other information for public companies.

7. External Auditors

Broad Role Perform audits of company financial statements to ensure that the statements are free of material misstatements Including mistatements that may be due to fraud.

8. Internal Auditors

Broad Role Perform audits of companies for compliance policies and laws, audits to evaluate the efficiency of operations, and periodic evaluation and tests of controls....