Topic 1D: Governance Flashcards
What are those charged with governance of a company responsible for?
Those charged with governance of a company are responsible for preparation of the financial statements
What is corporate governance?
The system by which companies and other entities are directed and controlled.
Why is good corporate governance important?
Owners of a company and the people who manage it are not always the same, leading to conflicts of interest
Who are the board of directors?
Usually the top management and are those who are charged with governance of that company. Duties are usually laid down in law and are wide ranging.
What is the essence of the role of a directors in a company (by law)?
- Act within their powers
- Promote success of company
- Exercise independent judgement
- Exercise reasonable skill, care and diligence
- Avoid conflicts of interest
- Not accept benefits from third parties
- Declare interest in a prosed transaction or arrangement
What is the main aim of the director?
Create wealth for the shareholders
What should directors consider in creating wealth for shareholders and having regard for stakeholder intersts? (6 things)
The consequences of decisions in the long term
The interests of their employees
The need to develop good relationships with customers and suppliers
The impact of the company on the local community and the environment
The desiarability of maintaining high standards of business conduct and a good reputation
The need to act fair as between all members of the company
Who has responsibility for the financial statements?
The directors
What are the directors specifically responsible for in regard to the financial statements (3 points)
- The preparation in accordance with a framework
- The internal costs that are need to enable the preparation of such statements that are free from material mistatement, whether due to error or fraud
- The prevention and detection of fraud
What does going concern mean with regard to business?
It means business is going to continue for forseeable future
What should directors explain in the financial statements?
Their responsibility for preparing the accounts.
What should the directors present on the financial statements?
A balanced and understandable assessment of the companies position and prospects in the annual accounts and other reports, such as interim reports and reports to regulators.
What should directors explain in financial reports with regards to objectives?
The basis for preservation of value and strategy for delivery of longer term objectives
What is an audit?
An independent examination of the accounts to ensure they comply with legal requirements and accounting stanards. Gives assurance the accounts, which are the resp of the shareholders, fairlyp resent the financial information and position of the company.
