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(ii) In fact, there are some threats will be bring basis on the external financial reporting and the independent audit of financial statements. For instance, the external financial reporting will reveal some significant records and management ways to outside even it is help in the governance corporation. Therefore, this risk of data divulge is the threat of company development. In addition, the non-objective of independent audit of financial statements is not enough to prove the fact.will lead wrong totally or ignore the incorrect transitions. The accuracy and fairness will be influenced in this way and threat the analysis of enterprise situation.
6. Briefly describe what you think is currently the most important corporate governance problem, and why you think this.
Depending on our analysis, there are many governance problems but the most important is Lack of promotion channel. Because staffs work in specific company mainly pay attention to the pay and return. Expected return will help employees make more values to organization. Generally the expected return are higher salary and good position, as we all know that promotion will help them get better returns. So the majority of staffs fight for promotion to higher position but cannot attain their goals even they gain higher performance. These staffs will lose enthusiasm to enhance performance due to they cannot be promoted in a period of time. Thus, enterprise's incentive enthusiasm doesn't develop functions efficiently and hide the governance of corporation, bring about the negative atmosphere in work.
7. Consider the relevant characteristics attributed to small retail (individual) investors vs. large professional investors (including institutional investors) in Australia. Briefly discuss the main differences in their capacities and opportunities to influence the governance of publicly listed corporations.
In Australia, there are two categories of investors in the financial markets: small retail investors and large professional investors. The differences between the two dictate not only the size of the trades they make, but also the types of companies and financial instruments in which they invest their monies. The term “small retail investors” is synonymous with “individual investors”.
The majority of retail investors buy and sell stocks in round lots, where a round lot refers to 100 shares. This is not to say an individual can’t place an order to buy or sell 50, 25, or even just a single share of a company’s stock, but it often isn't cost effective to do so because of the commissions that must be paid. It would be foolhardy to buy one share of a stock that was selling for $10 a share if the fee to do so is almost that amount, for example.
Large professional investors are just what the name implies: large professional, such as banks, insurance companies, pension funds, mutual funds, and exchange-traded funds, that buy and sell securities for their investment portfolios.
They are engage in block trades, which is an order to buy or sell 10,000 or more shares at a time. As might be expected, a large trade by an institutional investor can significantly affect the price of the security being bought or sold.
But through consider on the main difference in their capacities and opportunities to influence the governance of publicly listed corporations we suppose there some advantages and disadvantages each other. The small investors face the threat of high risk but are flexible due to the lower capacities and easy to be control. Compared with small investors, large professional investors are rigid to operate in publicity listed corporations. Even they are scientific regulate the invest still face the problem in environment of listed companies.
8. Outline the advantages and disadvantages of relying on “voluntary” behaviour of the participant in capital markets to determine corporate governance practices.
This behaviour of “voluntary” in attend capital markets to determine company governance practices possess advantages and disadvantages.
Advantages: That is free to the development of participators and elastic to the control of governance in the market. This way will good to them meet the correct stocks run up to higher level. Because the behaviour of “voluntary” in participate capital markets will motive them capital accumulation in long period of time. Also,this is positive effect on levels of institutional and foreign ownership. And large companies and companies with high debt voluntarily disclose more information correspondingly.
Disadvantages: In fact, the advantage will become disadvantage when utilize unreasonable or in bad situation of market. Such as we analysis it basis on voluntary” behaviour of the participant in capital markets to determine corporate governance practices, that are unscientific way in some cases. As the result of it is lack of professional plan to participate the capital market and can not be control easily when choose the incorrect option. And board leadership structure, liquidity, profitability and type of external audit firm do not have a significant influence on the level of voluntary disclosure, these elements were influenced in negative way.
9. (i) Briefly describe the corporate governance roles of external financial reporting and the independent audit of financial statements.
(ii) discuss the necessity for regulation in relation to corporations’ external financial reporting and the independent audit of financial statements.
(i)External financial reporting and independent audit of financial statements responsible for the financial part of corporate. They play vital roles in the corporation governance such as the external financial reporting help evaluate the operating effectiveness in a large extent. Because external financial reporting to report their business information to outside observers, including potential investors and lenders. In many cases, a company's external statements don't differ much from its internal accounting; other times, the difference might be substantial. What matters is that the external documents present a complete, accurate and readily understandable picture of the company's financial condition.
Additionally, the independent audit of financial statements are guarantor to the contents of financial report.It is an examination of the financial records, accounts, business transactions, accounting practices, and internal controls of a charitable nonprofit by an "independent" auditor. "Independent" refers to the fact that the auditor/CPA is not an employee of the nonprofits but instead is retained through a contract for services, and hence is "independent."As the right and accurate data will cause we are clear about the status of company in each part. Therefore, it is play a recognizor role in company governance.
(ii) Depending on our explanation about the roles of external financial reporting and the independent audit of financial statements, we known that both of them are vital to detect the expand of company. They can help company avoid of some traps and errors when operate and governance companies. In addition, the accurate and correct of them are make up the functions. Then, we need keep right data and records for ensure administration of organizations. That is the reason why external financial reporting and the independent audit of financial statements are essential to firms governance.
10. (i) Describe the causes and nature of the major contemporary general concerns regarding the governance of listed Australian corporations.
(ii)for each of the concerns you identified in (i), explain how might this be best remedied.
(i)We examine the corporate governance environment of listed Australian firms to investigate the factors that determine how firms respond to the problems and causes. We group barriers of corporate governance and collect to analysis it. Analysis of the conformance by listed firms with governance problems and causes highlights substantial facts represented and we revealed that the cost of operating, together with profitability, external audit quality, and ownership dispersion, jointly explain a firm’s decision to ‘comply or explain’. This study provides insights for policy makers and regulators and make it clear about the problems of corporate governance that are financial loosely and structure unsuitable in corporation as the relative factors barrier in the listed company of Australia.
(ii)There are some recommendations contained in corporate governance codes. Just like we have mentioned in (i), we known that financial loosely and structure unsuitable bring barriers to the listed company development.
Thus, we propose measure profitability of organization in regular period of time and formulation suitable plan to accomplished. Ensure the procedures of finance flow to limit the error in the calculate and operate of company. Next arrange homologous department and position to meet financial demand for deal with problems gradually.
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