SOX was created to help investors become more confident and comfortable with their investments. SOX was established as a corporate responsibility law that is applicable to all companies documented with the Securities and Exchange Commission (SEC). The SEC’s purpose is to increase the value of financial reporting (Mundy & Owen, 2013). Additionally, SOX’s goal was to advance the reliability and accuracy of financial reporting by employing regulations and requirements regarding internal control over financial reporting. SOX consists of 11 different sections, these sections call for upper management and auditors to arrange for assurances in relation to the strategy, application, use, testing, and assessment of controls, which relates to many features of financial reporting (Mundy & Owen, 2013).
Financial statements include the company’s net worth based on assets and liabilities, as well as the company’s expense, earnings and operational budget. Users may use the relevant financial statements to make decision for future plan. In the beginning of 1934, Congress created the Securities and Exchange Commission (SEC) which delegates standard setting authority to the private sector. SEC was delegated responsibilities and encouraged the private sector to set the standard as the first standard setting body for the accounting (Group 1). In 2002, the Sarbanes-Oxley Act (SOX) is passed by U.S. Congress to protect shareholders and the general public form accounting errors and fraudulent practices, and to improve the accuracy of corporate disclosure.
a) A stakeholder, according to the Stanford Research Institute, is defined as “those groups without whose support the organization will cease to exist. (Kosnik 1).” In other words, a stakeholder is any group that if it does not support the business, then the business will not function. For this case, the Broderick Corporation is the business. The stakeholders mentioned in this scenario include upper-level management and employees of the company, such as Phil Prior and the other staff.
The participants include the board of directors, managers, shareholders, creditors, auditors and stakeholders (Ramadhan, 2012). It further identifies the rules and procedures incorporated in decision making within corporate issues. Incorporation of corporate governance enhances the development of a structure that seeks to enhance proper achievement of organizational objectives through identification and incorporation of social, legislative, market and environmental aspects that directly affect the corporate functions of the organization. The adoption of the Act sought to ensure that businesses adopted high operational standards necessary in influencing the adoption of effective financial procedures that meet the stakeholder interests. Therefore, the adoption of the Sarbanes-Oxley Act within U.S. firms remained instrumental in ensuring that the firm meets the financial obligations of stakeholders through the adoption of the corporate governance
Between 2006 and 2010, the FASB has adopted thirteen different disclosure requirements to their Accounting Standards Codification. By adding these requirements, they ensure that companies cannot mislead their investors, thus benefiting investors to make informed decisions. Although this change is viewed in a positive light, there are also different costs associated with stricter regulation of disclosures. The most prominent of these costs are associated with implementing such changes. By making changes to the FASB’s Accounting Standards Codification, companies now are forced to adhere to these changes.
This act has closed the loopholes for public companies to defraud investors (Peregrine, 2012). This act also created a revision of the regulatory framework for the public accounting and auditing profession. The act is also used to strengthen CEOs and CFOs on the responsibility and accountability for financial disclosures and related controls as well as to increase the professionalism and engagement on corporate audits (Peregrine, 2012). The act has not prevented all situation that led to ethical financial, issues but the law has made significate changes. What this law has done, is reshaped the attitudes toward corporate governance.
The primary objective of this term is to balance the interests of the stakeholders like customers, suppliers, government, community, shareholders, management and financiers of the firm. With the help of governance structures and principles, companies are capable enough to distribute the rights and responsibilities of its various participants such as shareholders, creditors, auditors, regulators, the board of directors and many others (Armstrong, Blouin, Jagolinzer & Larcker,
Establishment of a takeover market was an attempt to make corporations more efficient by a way of creating a market where any corporation could be bought or sold. Taken over corporations would be downsized to achieve greater efficiency and to recoup the costs incurred as a result of a takeover, while a threat of being taken over would force the managers of other corporations to downsize as well. As a result of the takeover market, managers of corporations started focusing on the performance of the stock price. According to Ho (2009), corporations became exchangeable stocks: “The takeover movement culturally commoditized and transformed the very definition and purpose of a public corporation: the corporation became its quickly exchangeable stock
Governance within a business or organisation is the regulations, processes, policies, responsibilities, and procedures which are in place within an in order to control and overview the company, programmes, portfolios, control of projects, and management. Governance within an organisation is essential as this ensures that required internal controls are in place whilst also reassuring internal and external stakeholders that money within the organisation is being spent correctly and is justified. This is particularly vital when undertaking a project. Essentially, project governance ensures that the project is being undertaken correctly by ensuring that there are review procedures in place. Overseen by the Financial Conduct Authority (FRC), companies will also have to comply with the UK Corporate Governance Code, which is part of United Kingdom Company Law.
The requirement in order to make it the reports less complex, is to use “notes to financial statement”, which help explain the complex transactions (Kieso, Weygandt, & Warfield, 2013). The users of the financial reporting such as investors and creditors, have demanded that the information provided be current and predictive. With this demand, the SEC has required businesses to create a financial forecast (Kieso, Weygandt, & Warfield, 2013). Lastly, the SEC has appointed accountants and auditors to control and monitor the concerns of financial reporting such as management compensation, off-balance- sheet, financing arrangements, and related-party transactions (Kieso, Weygandt, & Warfield,
Also many companies reporting related to the state of the value added or environmental information, these are concentrated in industrial sectors. The financial statements reflect the financial position of company, financial performance and cash flows of the company, it is significant to note that the correct depiction of the impacts of transactions and other events and circumstances according to the explanations and criteria identification of assets, liabilities, income and expenses go in the same outline (Brealey,
The responsibility is to maximize profits for their company 's shareholders. Corporate directors also owe stakeholders a duty of care that is to say, a duty to make informed decisions for the benefit of the stakeholders. During the recent financial crisis, there was so much risk taken by greedy managers that when stakeholders lost money and it was revealed Directors were getting rich by the decisions then in response legislation had to address the need for increased risk assessment in our financial institutions, requiring increased disclosure to ensure that Directors would act morally, ethically and
99% of businesses have four key business functions, these include; operations, marketing, finance and human resource management. Each of these specific areas has their own attributions towards their businesses success and failure and often has dedicated departments and staff for these four business functions. Despite this the functions are interdependent meaning they rely upon one another to achieve and exceed their goals and expectations set by themselves and management. The function of finance affects and is affected by the other key business functions.
Corporate Leadership: A Review of Conventional Theories of Leadership Prof. Dr. Satya Subrahmanyam Head and Managing Partner Vignan Institute of Technology and Management Berhampur, Odisha, India satya69sb@yahoo.com Abstract This research article was motivated by the premise that no corporate grows further without effective corporate leaders. The purpose of this theoretical debate is to examine the wider context of corporate leadership theories and its effectiveness towards improving corporate leadership in the corporate world. Evolution of corporate leadership theories is a comprehensive study of leadership trends over the years and in various contexts and theoretical foundations.
A system to check and balances the benefit of all the board of directors and to avoid some of top management from making decisions that only benefit themselves is created and named corporate governance. Corporate governance means the system of rules, practices and processes by which a company is directed and controlled. The set of rules provided as a guidelines for the board of directors to make sure that accountability and fairness in a company’s relationship with its stakeholders such as financiers, customers, management, employees, shareholders and also society in order to achieve company’s goals and targets in a manner that add a value to the company. All of the stakeholders play an important role in corporate governance to ensure that
