Code of Ethics for Professional Accountants Essay

The code provides a abstract theoretical account antenna to the application of the brothamental rules of lord conduct1. integrity secure and trust.Accountants must non be associated with come inputs that contain materi exclusivelyy false or mis take ining statements contain info furnished recklesslyomit or obscure schooling where such(prenominal) would be misleading2. objectivitymoldiness be im personaial, h iodinest and free from conflicts of gratify Intrinsic entirelyy linked to independence, maestro independence is seen to be a subset of integrity and objectivity.3. professional competence and out-of-pocket c atomic number 18Maintain professional knowledge and skill defend constancy4. confidentiality5. professional behaviorthe conceptual simulation advancement adopted in the Code is principles- found, setting forth the principles as well as decrees of conduct.Threats expedience bratsSelf-review threatsAdvocacy threats promoting a position or opinion that comprom ises objectivity Familiarity threats a c retrogress relationship where one becomes too sympathetic to other(a)wises Intimidation threats unquestionable or perceived and is a deterrent from acting fair gamely An bullying threat to an accounts objective or competence and out-of-pocket c ar whitethorn arise where the accountant ispressured by a client. normative theories of ethicsNormative theories of ethicsNormative Theories of ethicsTeleological eventfulRight from wrong is desexualised from cases or consequences of a conclusion or action Identify consequences (costs and benefits) for each alternative course of action match the ratio of costs and benefits ( two economically and morally) manucircumstanceure a decisionDeontological non-consequential and rule deontology Consequences ar irrelevant The important is the intention to do the justly neighborly function or the motivation to be clear suitably flowing from a intelligence of barter. One dose the right subject simply beca occasion it is the right thing to do regardless the consequencesEgoism A right or unimpeachable decision is one that maximises net positive benefits to oneself. Can be curb if expediency is pursued within the law and fair competition Utilitarianism Does non focus on oneself A right decision is one that produces the greatest to the greatest number of peopleRights A decision testament yet be respectable if its intentions do non often the rights of s claimholders Rights include legal, contractual, special, particular, innate(p) and constitutional rights ProcessIdentify the rights particular to the stakeholderEnsure the decision is reconciled with respecting such rightsJustice Focuses on distri saveive justice which refers to the fair and tinctdistribution of benefits and burdens ProcessIdentify the benefits and burdensAssign the benefits and burdens to the variant stakeholdersDecide whether the demise of benefits and burdens is fair and equal Aristotle on j ustice Equals should be do by e very bit and unequals should be treated unequally.M 3Types of directorsDirectors hop on of directorsNot intricate in day-after-day decision- fashioning (AWA ltd v Daniels) essential condition procedures ar in place to ensure major(ip) operational issues argon brought to its attention,Directors dependentNon- sovereign directors Can be executive director directorsIndependent Directors Free from whatever puzzle out which would bias the decisions Free from all connections Should non been knuckle under concord to motion achieved Not involved in the business on a day-to-day basis Still required to demonstrate a duty of cargon, however may not equal to an executive director with professional qualifications decision holdr directors Occupying and hold an office as an executive in the telephoner Will never be free lance Can be paid on performance baseNon- self-sufficient non-executive directors Should not been paid according to performance achievedDuties of directors (4.62) Avoid conflicts of interest and where these exist, ensure they atomic number 18 appropriately declared and, as required by law, otherwise managed correctly Act in the lift out interests of the corporation (the nominee director must always act in the best interests of the corporation and use their agent only for proper purposes when making a decision on circuit lineup to which they have been appointed as a director) Retain discretionary tycoons and avoid delegating the directors responsibility Exercise powers for proper purposes (act within their power do not abuse their power) Act with care, skill, and attention (the archetype of care testament be disparate for a director with professional qualifications and a non-executive director) Be cognizant about the corporations trading operationsCommittees of the dining table 3.19intention raise the effectiveness of the get along with, and particularly of non-executive directors. Enable the distribution of workload to allow a to a greater extent detailed consideration to be given to important matters show an unaffiliated spatial relation in relation to issues which involve conflicts of interest It do not reduce the responsibility of the board as a unanimous and care wishs to be interpreted to ensure that all touch understand their functions The board of directors is still unlimitedly responsible for decisions made by sub perpetrations The foreign mission of duties enables examination of issues in greater detail and discussion of issues in the absence of watchfulness Requires written terms of reference for each sub military commission and procedures for get acrossing to the blanket(a) board Except for certain situations where scrutinise perpetrations are compulsory, it is up to boards to determine whether to have the missions and, if so, which committees are established.CommitteeKey role(s)MembershipRisk managementEnsure certain fortune is assessed, u nderstood and appropriately managed OECDdose not make specific recommendations about committees nominationRecommending the succession procedures within an governing body Appropriate to include executive directorsMajority of indie directors ( UK FRC CGC) lucre partake in with remuneration-especially for senior executivesPreferable to not include executive directorsFor macro companies, at least(prenominal) 3 independent non-executive directors (UK FRC VFV) inspect monetary communicateing and scrutinizeed account mattersOversight of inborn manoeuvreOnly non-executive directors, with majority being independent, independent chair, at least 3 components Only independent directors (Sarbanes-Oxley Act)For biggishr companies, at least 3 independent non-executive directors and at least one member with recent and relevant pecuniary experience (UK FRC CGC) hatchs on Corporate governing bodyReportKey focusCountryCadbury (1992)Best employment recommendations for board and committ ee twists comply or explicate if a attach to chose not to comply with a arrangement recommendation, the high society had to identify the noncompliance and consequently explain it to stockholders UKGreenbury (1995)Directors remunerationAdditional recommendations designed to enhance transparency in relation to directors remuneration UKHampel (1998)Replaced the Cadbury and Greenbury worksupercode, adopted into the listing rules on the capital of the United Kingdom Stock Exchange UKHiggs (2003)Non-executives directorsUKSmith (2003) study committeeUKCOSO 3.351994 Internal match a military operation designed to provide resonable assurance regarding the achievement of objectivesCalPERS (pension fund investor)Describe the type of governance it expects to see from companies USSarbanes-Oxley Act (2002) fortify audit requirements, join ond fiscal revelations and requires mgmt certification of internal reigns USHilmer (1993) meliorate board governance to enhance comp any performanceA USBosch (1995)Corporate Practices and stock, a report of the committee chaired by Henry Bosch AUSRamsay (2001)Produced by a committee chaired by Ian RamsayExamined the adequacy of Australian legislative and professional requirements regarding the independence of orthogonal auditors and made recommendations for changes Did not recommend a ban on the planning of non-audit serve to audit clients. Instead, he recommened that the disclosure requirements be enhanced. AUSHarris (1997)3.43Four channelize principles that should be employed to achieve more effective governance by boards in the public sectors. AUSUhrig (2003)3.43Considered the existing governance ar shopments for statutory authorities purpose a number of opportunities for improvement. The report in any case found a inadequacy of effective governance for several of the authorities due to a range of factors. Lack of board experience and expertise, together with the potential for conflicts of interests, are impediments t o computable performance. Limited powers of the board to a statutory body when compared to the private sector.AUSAudit unsnarlProhibit auditors to perform certain non-audit serviceRotate of audit partners after 5 yearsCorporate AccountabilityEach company must establish an audit committee drawn from members of the board of directors. The members of the audit committee must be independent. chief in operation(p) officers and CFOs must certify that the financial reports filed with the mo do not contain untrue statements or material omissions Financial disclosures and loansCertain personal loans by a corporation to its executives are out(p) Annual reports filed with the SEC must state that mgmt is responsible for the internal pull strings structure and procedures for financial reporting, and include mgmts assessment of the effectiveness of those internal overcome structures and proceduresCalPERSAn institutional investor which uses its considerable power as a provider of capital to force in merged governance improvements as it deems appropriate. Minimum standard to which merchandises throughout the workd should adhere in determine to attract its funds. exoteric celestial sphereAustralia 2003 ASX CGC Recommendations (revised in 2007 and 2010)If not, why not principle, and requires existence of audit committee in Australian top five hundred listed companies. 2004 Corporate Law Economic make better Program (CLERP) 9Key changes include audit reform and financial reporting. ASX CGC standards and Recommendations 2010 (If not, why not principle) In 2003 ASX produced a list of best act principles and recommendations on corporate governance and updated them in 2007 (when the term best practice was removed from the title) and 2010. ASX CGC 2007 recommends audit, remuneration and nomination committees. These are in that respectfore subject to the if not why not rule. Audit committee is mandatory for top 500 companies in Australia. For top 300 companies, compo sition of audit committee is overly defined in mandatory terms minimum 3 members, all non-executive directors, majority to be independent, and independent chair who is NOT Board Chair. PrincipleKey aspectsLay solid foundations for management and careRole and responsibilities of board and management should be established and disclosed Structure the board to play appraiseComposition and size of board to ignition its responsibilities and duties Promote estimable and responsible decision-makingEstablishment of a code of conduct and diversity constitutionSafeguard integrity in financial reportingAudit committee to safeguard the integrity of financial reporting by the company Make timely and balanced disclosure apocalypse of all material matters touch the companyRespect the rights of shareholdersFacilitate the effective exercise of shareholder rights certify and manage risksRisk oversight and management re chief(prenominal)ss internal controlsRemunerate moderately and responsib lyLevel and composition of remuneration link to performance4) outside(a) OECD Principles of Corporate GovernanceFeb 2010 OECD commentary noted the importance on issues of remuneration, risk management, board practices and exercise of shareholder rights, given the catastrophic performance sight from GFC. BRT 2010 Principles and the US practice are perhaps part of the drive for OECDs lack of any imperative statements on the issue that chairman and CEO should not be the same person.International perspectives on corporate governance commercialize found system of governanceEmphasises competition and market processesRelationship-based system of governanceEmphasise cooperative relationship and consensusMost established the US and the UKHave great influence on the rest of the world historical strength of the US and UK capital marketsGrowth of their investment institutionsAdopted by Australia and New ZealandRelies on the representation of interests on the board of directorsLong-term cro wing shareholders give the company a degree of protection from both the stockmarket and the threat of takeover Widespread equity ownership among individuals and institutional investors, with institutions often having large shareholdings Institutions including insurance companies, pension funds, and mutual funds. A supervisory board for the oversight of management, where banks play an active role, inter-corporate shareholdings are widespread and, often, companies haves close ties to political elites shareowner interests as the primary focus of company lawAn emphasis on minority shareholder protection in securities law and standard Insider groups supervise device management that often acts under their controlStringent disclosure requirementsDisclosure based market since numerous investors depend on access to concrete and adequate instruction flows to make intercommunicate investment decisions. The spot chore of the market-based system is much less of a problem in the relation -based control The role of the banks is less centralCorporations often have arms length relations of equity markets Corporate finance in such countries is highly dependent upon banks, with companies having high debt to equity ratios Banks often have tangled and long-standing relationships with corporations ( underside be debtors and shareholders at the same time) The market-based system assumes full disclosure of breeding, uncompromising adherence to trading rules and a liquid stock market. The innerr system is based on a deeper but more selective exchange of cultivation among insiders It is hard for institutional investors to grapple their shares when they are unhappy with the management or board, they become more engaged with companies they are investing in.US MarketThe board of directors is entrusted with an important responsibility to monitor the company on behalf of shareholders. It is viridity for the chair of the board and the CEO to be the same person CommitteesPurpo se to enhance the oversight function of boards and limit the powers of CEOs. Tasks the remuneration of executive directorsNomination of new board membersKey decisions in respect of auditingMany large investors closely monitor the corporate governance practices, however, in practice, shareholder in the US possesses limited power to appoint or remove directorsDifferences among European countries companionship law is embedded in different and often odd political cultural and well-disposed traditions. Different groups of people have the right to elect the members of the supervisory board. Articulate the purpose of corporate governance in different ways. Laws and regulations relating ti the equitable treatment of shareholders including minority rights in takeovers and other transactions, vary significantly among countries. Different corporate board structures exist.Variations in disclosure requirements and the resulting differences in learning provided to investors are a potential imp ediment to a single European equity market.GermanyRelationship-based nature in which all interested stakeholders are able to monitor corporate performanceFranceFrance and Italy are the European countries with the smallest ownership of company shares by financial institutions. The majority of shares traditionally have been owned by non-financial enterprises, which reflect and elaborate structure of cross and poster ownership. In France, half the firms are controlled by one single investor who owns the unequivocal majority of capital.Asian move upes of relationship-based systemsSignificant national differences in corporate governance policy and practice, and many countries are still engaged in a process of institutional development Government-controlled organisations perform roles that are consistent with the unsubtle social aims of the government, and their governance structure and processes reflect heavy government influence and control. Most companies in Asia either have a majo rity shareholder or a cohesive group of minority shareholders who act together to control the company. Companies with widely dispersed ownership are rare in Asia, therefore it is difficult to protect the rights of minority shareholders. The boards of directors of companies in Asia often behave a nominal and well-nightimes superficial role. Disclosure and transparency are often minimal, making it more difficult for regulatory authorities to take action. The lack of institutional shareholders and fund managers reduces the extent of external monitoring by flop institutions. All countries concerned are committed to a reform of corporate governance due to the 1997 Asian financial crisis.japanThe stately legal features of the Japanese corporate governance system resemble those in about other advanced industrial countries (Corporate law in Japan was modelled on the German System). In Japan, the board plays a more strategic and decision-making role, and is drawn from the ranks of manage ment who are employed by the company. Thus, in the West, the board members are outsiders representing the shareholders in Japan, the board members are insiders leading management. As a result, the role of Japanese boards may be considered superficial both in supervising the executive management and in responsibility for the company. Problem there is a tendency for the size of boards to grow as more managers need to be rewarded.Ownership structurekeiretsus essentially sets of companies with interlocking business relationships and shareholdings. The major keiretsus are centred on one bank. Each bank has significant control over the companies in the keiretsus and acts as a monitoring entity and as an nip bail-out entity. Advantage minimise the incidence of hostile takeoversDisadvantage corporate control being restricted courting studies of governance failureEnronAsset-lite companies unencumbered by physical assets and heavily dependent on their intangible assets. SPEs allow the main E nron business to apparently expand without incurring increasing on-balance sheet debt.HIH ill luck inadequate corporate governance checks and balances lack of financial and managerial diligence and control and a misconceived and complacent strategyWeaknesses apparent in different casesThe risk management systems have failed in many cases due to corporate governance procedures sort of than the inadequacy of computer models alone. Boards had approved strategy but then did not establish suitable metrics to monitor its implementation. Company disclosures about foreseeable risk factors and about the systems in place for monitoring and managing risk have also left a lot to be desired. Accounting standards and regulatory requirements have also proved insufficient in some areas leading the relevant standard setters to undertake a review. wage systems have in a number of cases not been closely link to the strategy and risk passion of the company and its longer term interests.UK FRC CGC c ontribution A LeadershipA.1.1 The board should meet sufficiently fastnessly to discharge its duties effectively. A.1.2 The yearbook report should identify the chairman, the deputy chairman, the chief executive, the senior independent director and the chairman and members of the board committees. A.2.1 operationalises the A.2 principles by stating that the CEO and chair should not be the same person.Main principles application comply or explainSection B EffectivenessB.1.2 Except for smaller companies, at least half the board, excluding the chairman, should comprise non-executive directors determined by the board to be independent. A smaller company should have at least two independent non-executive directors. B.2.1 states that there should be a nominationcommittee which should lead the process for board appointments and make recommendations to the board. This committee should have a majority of independent directors, and it apparent that executive directors may be on this committee . The committee should be chaired by an independent director or the board Chair. B.2.3 identifies that non-executive directors should be considered guardedly after they have completed six years service on the board. B.3 Directors should be able to spend enough time to do the ponder properly and that appointment procedures should identify the expected commitment. B.4 Directors are appropriately inform upon joining the board through a proper induction political platform and by provision of appropriate ongoing training. B.5 Directors who make decisions without adequate selective development are in demote of their duties. (Company Secretary and the Chair, as well as all directors) B.6 The board is responsible fro evaluating its own performance and the performance of the committees. B.7 Controversially, regular re-election to the board for all directors should, in large companies, be conducted as often as annually according to B.7.1Section C AccountabilityC.1 The board should pres ent a balanced and understandable assessment of the companys position and prospects. C.2 The board must select and define the risk appetite of the company, and it must plan strategies and operations accordingly. C.3.1 An audit committee should be formed and that its membership should meet the requirements. 1. members should be independent no-executive directors 2. for smaller companies, there should be at least two and, for larger companies, at least ternary, independent directors on the audit committee. 3. in smaller companies, the board chair may be on the audit committee but may not chair the committee. 4. At least one member of the audit committee should have recent and relevant financial experience. C.3.2 The main role and responsibilities of the audit committee should be set our in written terms of reference. C.3.4 Audit committee is the means by which whistleblowing is correctly managed although the term is not utilise in the code C.3.5 The audit committee should ensure ap propriate decisions are made about internal audit functions.Section D RemunerationD.1 Remuneration should be sufficient to attract the right people to be directors but should not be excessive. Recommendations regarding the remuneration directors, and especially the performance-related remuneration of executive directors, is key work to be undertaken by the remuneration committee. D.1.4 Remuneration committee should carefully consider remuneration commitments related to early termination and sad performance. D.2.1 The board should establish a remuneration committee comprised of independent non-executive directors. Must comprised of at least two persons fro smaller companies and at least three for larger companies. D.2.4 Shareholders should be invited to approve new executive incentive schemes and changes to existing schemes D.2.3 Non-executive remuneration should be determined by the board or by the shareholders. If permitted by the company constitution, the board may delegate this work to a committee which might include the CEO.Section E Relations with shareholdersE.1 discourse should lead to mutual understanding of objectives. E.2 Boards need to make sure that all shareholders are informaed about annual general meetings and have proper information and the proper opportunity to vote.M 4Shareholder conceptThe principal sum focus of our discussion in this module is on the Anglo-American derivative duties approach to stakeholders. Competitors are treated as stakeholders, stakeholders can also be environment. position theory and delegated powers delegation relationship a contract under which one or more persons engage another person to perform some service on their behalf which involves delegating some decision making strength to the agent. If both parties to the relationship are utility maximisers, there is good argue to believe that the agent go away not always act in the best interest of the principal.Assumptions underlying agency theoryAll individuals l eave alone act in their own self-interest. With potential conflict of interest between the principal and the agent, the agent will tend to act first in ways that will maximise their own personal circumstances Agents are in a position that allows them to further their own interests including at the expenditure of the principals, as a result of the decision-making power they have been granted and the fact that agents have better access to and control of the information.DelegationDelegation is getable unless the corporations constitution provides otherwise. It is common practice for boards to delegate day-to-day operational powers to the CEO but not extensive strategic decision-making powers.Agency theory costsResidual departure any loss or cost or under-performance arising from theses decisions or actions by the agent, represents a residual loss of value to the principals.Overconsumption of perks (perquisites or perks are incidental benefits gained in addition to income) Def the us e of such benefits in ways that exceeds expected levels. Effect reduce both profitability and bullion flow available for distribution to shareholders.Empire createDef acts by management to increase their power and influence in a company for reasons associated with personal satisfaction, including, but not limited to, large financial rewards for having a bigger job. Effect such personal raising may have little or no congruence with company profitability or success.Risk avoidanceDef minimise the downside risk that may affect their continued employment. Effect the organisation may therefore underachieve, with high re ploughs forgone, representing a loss of value to the shareholders.Differing timehorizonsAny management approach that is inconsistent with shareholders interest will demonstrate a lack of interest alignment or goal congruence. It can be ca apply by managers self-interest (only authorized year performance or performance during fix duration), or misunderstand between sha reholders and managers.Monitoring CostsIncurred by principals.Compulsory annual reporting and external auditingDiscretionary construct and analyse activities according to a strategic or Balanced ScorecardBonding Costsfull borne by the agent, not the principal.Many costs may be conceptual rather than dollar costs.Restrictions on freedoms are bonding costs borne by agents.Remuneration issues both(prenominal) payment for work undertaken and for surplus rewards that, in agency relationship, i screwly will relate to identified superior performance that recognises and encourages goal-congruent behaviour by the agent.Non-executive directorsShould not be paid according to performance achieved.Executive directorsKey focus of the non-executive directors who form the remuneration committee New regulation came into place after the Global financial crisis to ensure that remuneration committees should not have executives as members.Has an important role in ensuring that agents are correctly rem unerated fortheir performance and to motivate them to achieve goal congruence. Remuneration structure should not be designed so that self-seeking executives could damage corporations Executives should mother performance payments that are carefully structured. Disclosure and transparencyEmployees and ConsumersNew Australian Consumer Law protections against misleading potential employees. Whistleblower laws and rules that are becoming very important internationally Laws that prevent legal and other damage to employees (and others) who appropriately del with suspicions of wrongdoing inside geological formations Precise rules must be followed if protection is to practice to the whistleblowers.In Aus, the Corporations Act protects an employee ifThey report to the right (listed) people onlyThey are not anonymous andThey are not acting maliciously.Consumers and customersUnconscionable ConductProtect customers and business consumers where powerful parties to a contract use that power in ways that are sufficiently unfair as to be recognise as outrageous. Parol evidence additional words between the parties could not change the clear meaning of a written and signed contract. Dowsett v. Reid (1925) 15 CLR 695 the parol evidence should not apply because of the overall unfairness in the case. mercantile Bank of Australia v. Amadio (1983) Relief on the ground of unconscionable conduct will be granted when unconscientiously advantage is taken of an innocent party whose will is overborne so that it is not independent and voluntary, just as it will also be granted when such advantage is taken of an innocent party who though not deprived of an independent and voluntary will, is unable to make a worthwhile judgment as to what is in his best interests. Tests for unconscionable conductBargaining powerWere the conditions imposed on the consumer reasonably undeniable to protect the legitimate interests of the corporation? Was the consumer able tounderstand any of the documen ts used? Was any undue influence or pressure exerted on, or were any unfair tactics used against, the consumer? Was the gist paid for the goods or services higher, or were the circumstances under which they could be acquired more onerous, when compared to the terms offered by other suppliers?Where a person uses inside information for their own or a related partys benefit and/or discloses inside information to somebody whom they ought to have foreseen may use the information inappropriately. Identifying whether the information has been disclosed in such a way that it is available to investors in relevant market Identifying whether a person who understands markets would buy or sell a security were they to know that information. A person who possesses inside information must not use it or disclose it, as such use or disclosure is what actually comprises insider trading. Competition and protecting markets for goods and servicesMergers and acquisitionIn many jurisdictions, regulations a re in place that require or limit mergers and acquisitions unless they are formally approved.Abuse of Market powerThe prohibition on misuse of market power is aimed at preventing powerful entities from taking advantage of that market power for the purpose of disadvantaging weaker org Main principleMarket powerMisuse of that power (used that power to eliminate a competitor or prevent a competitor from entering or properly competing in the market). E.g. predatory pricing, the contribute of goods or services to a lower place cost over a period of time. It is prohibited because the likely real ambition is for the company to eliminate competitors who cannot sustain the ongoing losses of sell below cost. ACCCAgreements between competitors Cartel ConductTests1. Has there been a contract, bargain or understanding2. Has this occurred b/t competitors3. Is the arrangement for the purpose of secret approvalCompetitor collusion has a specific term cartel, which including Output restrictio nsApply restrictions on output what will cause shortages in markets and thus result in price rises Allocating customers, suppliers or territoriesDividing up markets, customers or regions b/t competitorsBid-riggingCompetitors who are asked to tender or bid for work conspirePrice-fixingCompetitors collude to create common prices (parallel conduct and price-following are legal) Midland Brick case 4.36 Both company and a seinor manager are order to pay civilized penalties .International airline pricing cartelUnilateral restrictions on supply (exclusive dealing)A single corporation decides to deal only with certain customers or geographical regions. This type of conduct is generally permitted, but prohibitions may exist if it is shown to change magnitude competition substantially. 3 characteristics that appliedIt is not cartel conduct.The unilateral refusal to deal will be unlawful if there is a substantial lessen of competition in a market. Third-line forcing a supplier forces a cu stomer to also purchase another item from a tercet-party. Case Ku-ring0gai Cooperative building society ltd (1978) 36 FLR An attempt by a building society to force a would-be borrower to take out mortgage insurance with a nominated insurer was in breach of the law.Resale price maintenanceA supplier stipulates that the goods it provides must only be resold at orabove a certain minimum price. 2 testsHas the supplier specified a minimum price?Has the supplier taken action or attempted to enforce this minimum price? If a reseller sell the product below cost, it is legal for supplier to withhold supply in order to prevent the reseller from losing leading with a suppliers products. Proof, penalties and redress miserable and civilCriminal penalties v Civil penaltiesCriminal cases are always carried out by agencies of the state and never by individuals or corporations. Any aggrieved party can bring an action for a civil case.For civil case, the standard applied is a proof based on the balance of probabilities rather than proof beyond reasonable precariousness as in criminal cases Neither parties will be penalise by jail or fines in a civil case, as these apply only in criminal cases. The court may stage damages to the injured party may apply injections and make other orders such as rescission of contracts in civil cases. Even third party dropped the case, ACCC can still proceed against wrongdoers on civil or criminal grounds.Redress and penalties for anti-competitive breachesRedress is the ways in which wrongdoers can be required to correct the harm they have caused. Penalties are different from remedies as they are meant to punish a wrongdoer, thus, penalties goes beyond simply redressing wrongs. In Aus, criminal breach of cartel provisions may lead to individuals being fined hundreds of thousands of dollars, and up to 10 years jail. Fines for corporations can be as high as $10 million.M5CSR REPORTWhy choose to provide specific information about CSR-related i nformation (Voluntary process)Ethically motivation (Accountability-based) Organization owns an accountability to various stakeholders Driven by concerns that stakeholders rights to know are being fulfilled enlightened self-interest (managerial-based) Economically focused motive to use social and environmental reporting to protect or enhance shareholder valueThe reason an entity choose to report will in turn inform the decision as to whom it will be directedWill seek to citation the information needs of a wider range of stakeholders who might be most impacted by the operations of the entityThe target recipients of reports will in turn inform what information will be disclosed and what issue the social and environmental reporting should report Information to demonstrate accountability for those aspects of the operations for which they are deemed to be accountable, such disclosures would arguably be more objective Normative theory prescriptions or shoulds, ideals Such disclosures wi ll lead to partnership support and potentially positive financial implications Stakeholders who are regarded as more important or with more influence will attract additional effort and attention from managers (reporting information to inform the powerful stakeholders) (details in 5.23) Limitations of traditional financial reportingAustralias current conceptual framework (AASB framework for the preparation and presentation of financial statements) Embrace a shareholder primacy perspective with a narrow notion of accountabilityThe practice of give the sacking future cash flowsEncourage us to shift problems of an environmental nature onto future generations. If we discount future obligations, then, in the current period,they may not be considered to be materialDefinition of the elements of FRAsset (must be controlled by the entity)The exercising of assets which are not controlled by the entity will not be recognized as expenses (usage of public goods which are not exchanged in marke t transactions) ExpensesBased on the definition of asset, use of clean air and pee will not be recognized as expenses unless fines are imposed.ExamplesRetrenchments in response to the global financial crisis (did not count the expenses of people who lose their jobs) Reserve Bank of Australia increase the interest rate in 2010 to increase profit (did not count the plight of those people who lose their homes) Just-in-time approachIncrease the traffic congestion, and pollutionResultsEnvironmental cost is borne by the community.Provides a disincentive for investment in clean technologies.Issues of reliable measurement and prospectEnvironmental cost can not been measure as blueprint liability since because of the probability issue Many companies used the issue of quantifiability in number of situations as a rationale for non-disclosure, for provisions.Thus, the related parties would not know the true extent of the organisations environment-related obligations.The entity assumptionRe quire the entity to be treated as an entity distinct from its owners, other org and other stakeholders. Externalities caused by reporting entities will typically be ignored Performance measures are incomplete from a broader societal perspective.Key point of import reports (Module 5)Legitimacy Theory (BHP WESTPAC)An organization will take action to manage community perceptions in order tosurvive Try and convince stakeholders that it is acting with an acceptable level of ethical and moral conviction whilst pursuing its main objective Legitimacy itself is considered to be a resource on which an org is dependent for survival The theory relies on the notion that there is a social contract b/t the org and the society in which it operates Org must appear to consider the rights of the public at large, not merely those of its investors Legitimacy is assumed to be influenced by community perceptions (which can be influenced by disclosures of information), and not simply by (undisclosed) chang es in corporate actions Org will be penalized if they do not operate in a manner consistent with community expectations Meeting the expectations of the community can protect or enhance profitability CSR report could be a central strategy to maintaining corporate legitimacyBCA report about the regulation of CSR reportIn favor of no regulation needed for CSR reportAll drivers analysis by the BCA are tied to maximizing the value of business The motivation are tied to managerial reasoning rather than border ethical considerations Suggest freely operating(a) markets will lead to the resolution of many existing social and environmental problemsPJCCFS 2006 the final report regarding the CSR in 2006Adopted the same position as that promoted by BCAIn favor of not supporting the introduction of decreeWith an interpretation of current legislation, the enlightened self-interest is the best way forward for Australian corporationsThe Brundtland ReportEmpirical evidence consistent with legitimacy theoryPatten (1992if the Alaskan oil spill resulted in a threat to the legitimacy of the oil colour industry, and not just Exxons, then legitimacy theory would suggest that companies operating within that industry would respond by increasing the amount of environmental disclosures by the petroleumcompanies for the post 1989 periods, consistent with a legitimization perspective. This disclosure chemical reaction actually took place across the oil industry Deegan and Rankin (1996) Australia studyPublic disclosure of proven environmental prosecutions has an impact on the disclosure policies of the firms involved Deegan, Rankin & Tobin (2002)Positive correlations b/t negative media attention for certain social and environmental issues and the volume of disclosures on these issues Islam and Deegan (2010)For industry-related social and environmental issues attracting the greatest amount of negative media attention, corporations react by providing positive social and environmental disclo sures period regulations for CSR ReportingNational Greenhouse and Energy Reporting Act 2007 (NGER Act)Who are regulatedUltimate Australian holding company of a corporate group is required to apply if its exceeds one or more of the 4 room accesss (5.42) What need to be reportedGreenhouse gas emissionsEnergy outturnEnergy consumptionOther info specified under NGER legislationRequirements embodied within the Corporations Act and accounting standards S 299(1)(f) of the Corporations ActRequires that in the directors report, which must be include in the annual report, directors must give details of the entitys performance in relation to environmental regulations if the entitys operations are subject to any particular and significant environmental regulation under a law of the Commonwealth or of a State or Territory S 299 A of the Corporations ActListed companies are required to include in the directors report any information that shareholders would reasonably required. (operations, fin ancial position, and business strategies and prospects for future financial years) However, no specific requirement to disclose financialimpacts. Obligations relating to environmental performance could be considered to be included in either provisions or contingent on(p) liabilities, depending on the circumstances. However, many entities choose not to disclose such information due to the probability and reliable measurement issues. Contamination to land caused by the construction of particular plant shall be included as part of the total cost of the property, plant and equipment, with an equivalent amount being included in the liability provisions of the entity National Pollutant InventoryDesigned to give in political and economic incentives for industry to move towards cleaner productions Requires industrial facilities operating in Australia to estimate emissions of 93 substances exceeding a specified threshold amountEnergy Efficiency Opportunities Act 2006Encourages large ciphe r-using businesses to improve their energy efficiency by requiring business to identify, evaluate and report publicly on cost-effective energy savings opp