Corporate Social Responsibility and Corporate Governance

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Question 3

IFAC PRINCIPLES OF PROFESSIONALISM

IFAC is an acronym that stands for the International Federation of Accountants which is a global body the accounting profession. It was founded in 1977 and its mission is to serve the public interest. In order to pursue the mission of serving the public’s interest, they (IFAC board) established the Ethic’s board for accountant which is now known as the International Ethics Standard Board of Accountants (IESBA) to help issue and develop high ethical standard quality, power and all other assertions for worldwide use by professional accountants. The code of ethics are ethical requirements for professional accountant both in public and private practices. Any firm or member of this body (IFAC) is expected to adhere to these ethical principles unless it is prohibited by regulation. (IFAC, 2005)

According to IFAC (2013), there are five fundamental principles that a professional accountant in business and public practice should adhere to namely; Integrity, objectivity, confidentiality, professional behaviour and professional competence and due care.

Integrity- A professional accountant is expected to be candid in both business and professional relationships. This principle was breached when Hannah Yin and Lazlo Ho where not honest about the future risk of the company and only reported the best case scenario.

Objectivity- A professional accountant is expected not to allow favouritism, unwarranted influence or conflict of interest to supersede s/he occupational judgement. Hannah Yin breached this principle when she accepted Ho’ offer of shares if she complied with his suggestion.

Professional competence and due care- The professional accountant is expected to maintain the professional knowledge and skills at the required level to ensure that its client and business receives skilled or proficient services based on the recent improvements in practice or legislation in accordance with the appropriate techniques and standards.(IESBA, 2009)

Confidentiality- A professional accountant is expected not to reveal any data or information to other parties lest it is required by a legal authority to do so. This principle was complied with as none of them revealed the information to anyone outside the business.

Professional Behaviour- A professional accountant should not involve in any activity that will bring dishonour to the profession thereby complying with the statutory laws and regulations. This has been breached by the Hannah Yin and Lazlo Ho by not complying with some of the fundamental principles.

QUESTION 4

DOES GOOD COPORATE GOVENANCE MATTER AFTERALL?

Writer- Ishioma Odibi

Corporate governance can be defined as the legal framework within a business and the principles whereby organisations are governed. (Fernando, 2009) According to the Cadbury report (1992), it is a way in which companies are controlled and directed. It was further explained that the board of directors are responsible for their company’s governance while the shareholders governance role is to assign the auditors and directors and to make sure that appropriate governance structure is in place. In the Australian context, Hilmer (1993) laid emphasis on the deliberate obligation of the board which suggests that the board’ key role is to ensure that the corporate management is incessantly striving for high performance.

According to Bob and Robert (2012) Corporate Governance is all about the obligation to company values, corporate fund in managing a company and ethical conduct in a business. The scope of corporate governance is to evaluate the board structure, the business operations and effectiveness, transparency and disclosure, risk management and compliance and the strategic planning and monitoring of a company.

The purpose of good corporate governance is to make sure the board is transparent in managing the business, to ensure that the shareholders interest are well secured and to make sure that the investors exercise their full rights in the organisation. (ACCA, 2008)

The main duty of director is to ensure that you communicate significant matters to the shareholders and also, consider the stakeholders interest for example the employees. According to the Company’s Act (2006), directors are expected to act in the best interest of the company, avoidance of conflict of interest, directors should act and exercise care for the benefits of the shareholders, and thorough skills in their decision making and to welcome wider social responsibilities. A director must make sure that the health and safety of employees are well secured and also take steps to minimise company losses if there are financial difficulties.

P&J being a successful company that uses the income from its mining to help develop poor countries and practicing good social responsibility is currently endangered with the future risk of environmental hazards which resulted from X32. The CEO bribed the finance director to report only the best case scenario to the shareholder and the worst case as an evidence of the business’ CSR. As earlier mentioned, P&J is expected to give full disclosure to the shareholders as to what is really going on regarding the future risks that the company will face and the strategies being used to reduce and avoid such risks.

In other words, P&J has not been practicing good corporate governance if they had, there would be corporate accountability and transparency and there won’t be fraud or bribery in the company.