FNS50210: This Unit Describes The Performance Outcomes Skills And Knowledge Required To Review: Diploma Of Accounting Assignment, SU, Australia

INTRODUCTION

This unit describes the performance outcomes, skills, and knowledge required to review corporate governance requirements, implement operating procedures, and monitor policy.

This unit has application to a variety of financial services sectors and is applicable to individuals working within enterprises and job roles subject to licensing, legislative, regulatory or certification requirements so the varying Commonwealth, State, or Territory requirements should be confirmed with the relevant body.

1.  Review corporate governance requirements

1.1 Corporate governance requirements are identified and analyzed to determine the application to operations, Corporate governance is a broad-ranging term which, amongst other things, encompasses the rules, relationships, policies, systems, and processes whereby authority within organizations is exercised and maintained. The governance attributes of an organization are shaped by a variety of factors, both “internal” (e.g. constitution, organizational policies) and “external” (e.g. laws, regulations, community expectations). A board of directors plays a pivotal role in influencing an organization’s governance environment. A common goal for many organizations is to have the most effective governance framework in place that best meets their individual circumstances and needs – helping to drive enhanced organizational performance while at the same time aiding conformance with various requirements (e.g. the company’s constitution, policies, controls and procedures as well as with applicable external regulations and laws).

Objectives of corporate governance: Corporate governance ensures that appropriate internal control systems are adhered to and implemented to achieve the organization’s objectives, protect stakeholders, and build their confidence. Corporate governance requires self-regulation, ethical standards, and enforceable obligation that arise under the Corporations Law. The shortage of corporate governance led to many corporate collapses such as Bond Corporation, One-Tel, ABC ltd, HIH Insurance, Baring Bank, Enron, and many more. Corporate governance would control the organization’s environment through implementing:

a) Corporate governance policies

b) Adherence to the corporation code of ethics

c) External audit

d) Managers’ risk

e) audit committee of directors and executives

f) Multiple directorships to prevent collusion.

Corporate governance is the system of principles, policies, procedures, and clearly defined responsibilities and accountabilities used by stakeholders to overcome the conflicts of interest inherent in the corporate form. Hence, the importance of understanding the different forms of business. Corporate governance affects the operational risk and, hence, sustainability of a corporation. The quality of a corporation’s corporate of governance affects the risks and value of the corporation. Effective, strong corporate governance is essential for the efficient functioning of markets. There are inherent conflicts of interest in corporations in which the ownership and management are separate. Objectives of corporate governance:

a) To eliminate or mitigate conflicts of interest. Particularly those between corporate managers and shareholders; and

b) To ensure that the assets of the company are used efficiently and productively and in the best interests of its investors and other stakeholders.

1.2 Clarifications on the application of corporate governance requirements are accessed from authoritative and recognized sources The Australian Securities & Investments Commission (ASIC) is an independent Australian government body that acts as Australia’s corporate regulator. ASIC’s role is to enforce and regulate company and financial services laws to protect Australian consumers, investors, and creditors. ASIC was established on 1 July 1998 following recommendations from the Wallis Inquiry. ASIC’s authority and scope are determined pursuant to the Australian Securities and Investments Commission Act, 2001.

ASICS was originally formed as the Australian Securities Commission (ASC), which came into being on 1 January 1991 in accordance with the (then) ASC Act 1989. The purpose of the ASC was to unify corporate regulators around Australia by replacing the National Companies and Securities Commission and the Corporate Affairs offices of the states and territories. The corporate regulator became the Australian Securities & Investments Commission (ASIC) on 1 July 1998, when it also became responsible for consumer protection in superannuation, insurance, deposit-taking. It has since gained further responsibilities: in 2002 for credit, the Australian Stock Exchange in 2009, and Chi-X in 2011. In 2012, ASIC called for powers to use data that other intelligence agencies have intercepted.

The Australian Securities and Investments Commission Act 2001 requires ASIC to Maintain, facilitate and improve the performance of the financial system and the entities in it Promote confidence and informed participation by investors and consumers in the financial system Administer the law effectively and with minimal procedural requirements Enforce the law Efficiently receive, process, and store company information Make up-to-date company and corporate information available to the public.

All businesses in Australia must comply with specific ASIC requirements. These requirements differ depending on the business.

1.3 Internal control procedures are reviewed and developed reflecting the application of corporate governance requirements to internal operations Small business owners usually spend copious amounts of time planning business functions and processes. Accounting is an important business function in small businesses. Business owners use accounting to record and report various pieces of their company’s financial information.

Accounting procedures represent the specific guidelines business owners and employees follow when preparing accounting information. Internal controls are another important small business function. Internal controls create safeguards to protect the company business or financial information and operational performance.

Accounting Workflow: Accounting workflow is a procedure that dictates how information or documents will flow through a company’s business operations. This procedure may not be as important for business owners to complete all accounting functions. However, larger business organizations use accounting procedures to ensure employees handle all financial information in a consistent manner. Accounting workflow provides guidelines for gathering internal and external documents, entering information into the company accounting ledger, and filing it according to standard operating procedures.

Internal control is all of the policies and procedures management uses to achieve the following goals.

Safeguard assets – well-designed internal controls to protect assets from accidental loss or loss from fraud. Ensure the reliability and integrity of financial information – Internal controls ensure that management has accurate, timely, and complete information, including accounting records, in order to plan, monitor, and report business operations.

Ensure compliance – Internal controls help to ensure the organization is in compliance with the many federal, state, and local laws and regulations affecting the operations of the business.

Promote efficient and effective operations – Internal controls provide an environment in which managers and staff can maximize the efficiency and effectiveness of their operations.

The accomplishment of goals and objectives – Internal controls system provides a mechanism for management to monitor the achievement of operational goals and objectives.

Internal accounting control procedures include:

a) adequate segregation of duties

b) proper authorization procedures

c) adequate documentation and records

d) physical control to safeguard the company assets

e) independent reconciliations and verifications

f) practice and procedure manuals

g) Clearly defined lines of responsibility and authority.

An internal control system is the plan of an organization designed to increase the probability of achieving its operating and reporting objectives. It includes all practices and procedures introduced by management to achieve their goals as efficiently and effectively as possible.

Adequate segregation of duties independent checks and reconciliations safeguard the assets of the company implement corporate policies and procedures hire qualified personnel Define lines of responsibility and authority

The framework of a good internal control system includes:

Control environment: A sound control environment is created by management through communication, attitude and example. This includes a focus on integrity, a commitment to investigating discrepancies, diligence in designing systems and assigning responsibilities.

Risk Assessment: This involves identifying the areas in which the greatest threat or risk of inaccuracies or loss exists. To be most efficient, the greatest risks should receive the greatest amount of effort and level of control. For example, the dollar amount or the nature of the transaction (for instance, those that involve cash) might be an indication of the related risk.

Monitoring and Reviewing: The system of internal control should be periodically reviewed by management. By performing a periodic assessment, management assures that internal control activities have not become obsolete or lost due to turnover or other factors. They should also be enhanced to remain sufficient for the current state of risks.

Information and communication: The availability of information and a clear and evident plan for communicating responsibilities and expectations is paramount to a good internal control system.

Control activities: These are the activities that occur within an internal control system.