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Accounting

Autor:   •  February 12, 2018  •  1,276 Words (6 Pages)  •  234 Views

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The director will not be said to be independent if he or she (Lecture Slide , CSU Resources):

Is associated with any shareholder is, or is connected with, a significant shareholder,

has been a representative in an official authority in the most recent three years, or a director after such work,

has been an essential or worker of an expert to the organization in the most recent three years,

has been a material supplier or client,

has a material legally binding association with the organization,

has served on the board for a period which could be sensibly seen as tangibly influencing the director’s capacity to act to the greatest advantage of the organization,

has an interest or relationship which could be sensibly seen as substantially meddling with the director’s capacity to act in the organization's best advantages.

Australian recommendations for inclusion Independent directors in a board of directors,

As per ASX, there should be the following corporate governance Principles and Recommendations ("Corporate governance principles and Recommendations", 2016):

- Companies should establish and also disclose the roles and responsilbilities of board and management.

- Companies should promote the ethical and responsible decision making such as maintaining the company’s integrity, account for their legal obligations and the reasonable expectations of their stakeholders as well.

- Companies should have a structure to independently verify and safeguard the truthfulness of the financial reports

- Companies should design a communications policy for promoting effective communication with the shareholders.

- Companies should also establish a sound system of risk management and internal controls, like the board should disclose that whether it has received the assurance from the CEO and CFO that everything that has been declared has been done as per laws and protocols.

Evaluation of continuing need for Independent directors

There will be the following reasons that will give light on why there will be the continuing need of the independent directors,

Only the Independent directors, without having any inherent conflict of management can effectively challenge matters bought on the board as they have no self-interest to protect and they will not suffer from internal views.

They will provide and independent appraisal – separation of ownership and the control.

They will present the public face of the business and therefore it seems to be creditability to the governance model

Shareholders will get the fair and true financial reports and internal controls for stakeholders.

Barriers to the role of Independent directors

There will be still the few barriers in the role of independent directors, that could be as follows,

- The interest could be artificial for the independent directors since ht epeople who are more aware of the company’s performance could do fair jobs who have more experiences.

- They could have lack of relevant experience and hence can be conservative in decision making

- They can be unaffected by the self interest and interest in the performance of company can be reduced.

Recommendation

With following barriers and evaluations, with the importance of corporate governance, we can recommend that to have Independent directors on the Board will always gives a positive approach in the functioning of the company.

Referencing

Corporate governance principles and Recommendations. (2016). asx.com.au. Retrieved 21 August 2016, from http://www.asx.com.au/documents/asx-compliance/cgc-principles-and-recommendations-3rd-edn.pdf

Gay, G. & Simnett, R. (2010). Auditing & Assurance Services in Australia (6th ed.). Mc Graw hill Education.

Interact CSU Resources Auditing Lecture Slides

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