Example Of Corporate Governance Essay
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Corporate governance is the set ups of corporations that enable the corporate to run smoothly. The governance ensures that there is transparency and equity to the customers, employees, investors, the community, and the government. It ensures maximization of the value of the shareholders both legally and ethically. A corporate with good governance creates a convenient environment for long-term productivity, an environment that encourages managers to maximize return on investment and encourages efficient operation. This environment in return enhances better performances of corporate. Governance has influence on the decisions of the stakeholders about the corporate. For instance, the public is greatly influenced by the performances of corporation. The more confident the public develops towards a certain corporate the better, as it will reduce the cost of advertisement. Hence, it is the role of the corporate governance to create such confidence to the society. It is evident that the role of the corporate governance is to create the good relationship among the stakeholders of any company.
The responsibilities of corporate governance are upon the management, the board, and the board committee. They are responsible for making decisions hence, determining the performance of the company. They are responsible for making decision on what to invest, how to invest, and how to spend the company resources. How the board, the committee, and the management run the company determines its governance. However, the management, the board, and the committee require financial information from the accountants throughout their governance. Hence, the paper discusses the role of an accountant in relation to the corporate governance. The paper further discusses the kind of information that an accountant needs to give to help the board and board committee run an organization smoothly.
Influence of good governance
Good governance in a corporate influences the willingness of the interested investors to invest in that corporate. If the corporate exhibit good governance, it will attract investors, as they will have confidence in their investment. Through good governance of being responsible to the government for proper payment of tax, the corporate portrays a good picture of acting within legal constraints. In addition, good corporate governance encourages shareholders not to divert their shares to a different company, as they will be assured of increased return on their shares.
Accounting plays a major role in promoting corporate governance through the financial reports. Finance being the major issue of any business, its accountability determines on how the stakeholders will perceive the corporate from its financial reports. Hence, accounting plays a major role in reporting the financial information to all stakeholders involved to enhance corporate governance.
The role of accounting in corporate governance is to collect financial data, compile the data analyze it and then report the data to the interested parties, which is to the stakeholders. Corporate governance regards, accounting as one of the most relevant department in good governance. The accounting system is responsible for ensuring full disclosure of the corporate financial reports. In attempt to disclose, the right information accounting may follow international accounting system to keep up to date financial standards. For instance in coming up with financial statements, balance sheet, shareholders’ equity and the corporate cash flow accounting need to use accounting standards in developing this documents.
Roles of an accountant
An accountant is responsible for carrying out accounting practices in a corporate business. An accountant is responsible for tracking the organization expenditures and income to come up with the correct image of the financial position of the corporate. After getting the accurate picture of the financial position of the organization, then the board and the board committee will find the possible ways to ensure that the shareholder's values are maximized. Additionally an accountant creates a basis for continued growth and success of an organization.
Data management is one of the roles of an accountant, which entails financial data collection and maintenance. Accountants maintain financial records in compliance with the accepted procedures and laws in corporate governance. As well, the accountants are responsible for developing and maintaining corporate data and controlling the organizational procedures. Financial data collection and maintenance is very essential to business management, which affects the corporate governance. Proper financial data management contributes to good corporate governance.
Financial data analysis and advising the management
Accountants play a significant role in analyzing the financial data of a corporate. The analysis made helps the board and the board committee in making corporate decisions. Such analysis may be, of revenue and expenditure trends, decision on payment of bills and the expectation of future financial position of the corporate. Accounts serve as advisors to the board and board committee by telling them about the kind of procedures to take to increase the efficiency of corporate resources. They also advise the board on when it comes to particular financial problems and proper ways of mitigating such problems.
Accountants are responsible for ensuring that they avail financial reports on time to the interested stakeholders. For instance, financial reports are prepared on annually, semi-annually, or quarterly. This kind of information is highly needed by the board, board committee auditors, investors or the government for the purpose of taxes. Accountants should ensure that they comply by availing the reports to enhance corporate governance.
Preparation of financial reports
Accountants prepare financial reports based on compiled and analyzed data that is available. They prepare the data accurately on quarterly or annual basis. The financial reports may, be used by the board or board committee in implementing and developing corporate operations to increase corporate governance.
Ensures external business affiliations
Accountant works closely, with the government accounting, the public accountant, and the management. Accountants are responsible for giving data to the public account to access the tax and consult the company accountant. They are responsible for giving the government accountants the company reports to enhance the taxation process. Through the external affiliations, they can give the board committee detailed information from the external that help in improving the corporate governance.
Kind of information that accountants provides
It is evident that the account is responsible for collecting data analyzing it and then reporting it to the necessary parties. In our case, the interested party is the board committee and the management in the attempt to improve the corporate governance. The board alone will not enhance good corporate governance, but they need the help of financial information from the accounts to develop the governance. Hence, the accountants give the board and the board committee the relevant information that is geared to good corporate governance. The board committee then uses the information to improve the governance, which in return enhances a positive competition of the business. The kind of information that the account provides the board with is from various stakeholders of that corporate. The board needs to understand the perception of all the stakeholders for good governance.
Income statement information
The income statement states the corporate revenue and expenditure for the already covered period. The income statement carries the important information to the board, as the board can use the information to know how the corporate money was spent. The board can as well use the information to know the company's net income. The board can use the information to improve the governance of the corporate.
Balance sheet information
The board committee gets the current financial information of the company from the balance sheet prepared by the accountants. In preparation of the balance sheet, accountants use international standards of account by starting with the company’s assets followed by the company’s liability finally the owner’s equity. The board committee uses the information to determine the company’s current financial position. The accounts as well try to compare balance sheets of the previous periods to determine the changes of the company performance. The information is important to the board as they can detect whether the company is improving or is declining in terms of performance. Through the information, the board committee can improve the corporate governance.
Information about public accountability
Under proper corporate governance, the corporate is responsible to the public for paying correct taxes. Most corporate tend to evade taxes to maximize their profits instead of acting legally to optimize the corporate profits. The corporate needs to, account for the public through full disclosure of their financial reports. It is through the financial reports that the public bases the assumption whether to invest in the company or not to invest. Investors as well use the information to ensure that the corporate is running on legal practices to cater for their investment. If they detect any misrepresentation of their investments, they can act a gently to ensure that they do not suffer losses.
Information about the shareholder's equity
Accountants give the board and the board committee the information of the shareholder's equity. This kind of information enhances the board to ensure that shareholder's investment is utilized. Utilization of shareholder's investment encourages investors to invest more in the corporate. Since shareholders have the financial reports, they can detect when they feel that the corporate is wasting their investment. Hence, the information helps the board to make wise decisions about the shareholder's investment.
Information about the cash flow management
The board needs to understand the cash inflows and cash outflows. This information will help the board to understand the amount available to spend and where, to spend the money. This will facilitate the board to manage the money by giving the priorities depending on the urgency. In addition, information about cash flow management helps the board when they make decisions about how to acquire equipment, labor and how to supply the corporate goods. The information is crucial to minimizing corporate debts, which enhances good corporate governance by portraying a good corporate image.
In conclusion, the responsibility of corporate governance is bestowed on the board, board committee and the management. However, full disclosure of corporate financial information determines the level of corporate governance. Accountants are responsible for giving the financial information that the top managers require to maintain and improve the corporate governance. Through the improved maintenance, managers will improve the competitive nature of the company. The good governance will attract the public hence encouraging more investors in the company. Proper governance as well will create confidence in the shareholders and encourage them to invest more due to assured good returns on their shares. Shareholders will also have confident that their investment is in good use via proper governance. By adhering to the legal practices like payment of tax, shareholders are assured of safety as their investments is operating under legal procedures that pertains the statute laws.
Idowu, Samuel O, and Kismet T. Caliyurt. Corporate Governance: An International Perspective. , 2014. Internet Resource
Tsamenyi, Mathew, and Shahzad Uddin. Researching in Accounts in Emerging Economies: Vol. 10. Bingley: Emerald, 2010. Print
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