Corporate Governance

    Cards (12)

    • Corporate Governance
      The means by which a company is operated and controlled
    • Hough & Co, a listed company, is currently reviewing its corporate governance practices to ensure they are compliant with regulations
    • Corporate governance policies Hough & Co has in place

      • Remuneration committee comprising 3 non-executive directors
      • Audit committee comprising the finance director, the chief executive and 2 non-executive directors
      • Separate people taking on the roles of chair and chief executive
    • Functions of audit committees
      • Planning the annual external audit
      • Reviewing the effectiveness of internal financial controls
      • Reviewing and monitoring the external auditor's independence
    • Remuneration committee
      Ensures no director is involved in setting his own pay and the pay that is set is at an appropriate level
    • Key elements of the Code of ethics are: Conceptual framework, Fundamental principles, Threats and safeguards, Confidentiality, Conflicts of Interest
    • Independence (in order to be a trusted auditor)

      Freedom from situations and relationships where objectivity would be perceived to be impaired by a reasonable and informed third party
    • Approaches to the Conceptual Framework

      • Rules Based
      • Principle Based
    • Principle Based Conceptual Framework
      • Flexible - can be used in unusual or rapidly changing circumstances
      • Can be applied across borders
      • Accountant uses professional judgement
      • Requires compliance with the spirit of the guidance
      • Can still include rules for common situations
    • Fundamental ethical principles
      • Integrity
      • Objectivity
      • Professional competence and due care
      • Confidentiality
      • Professional Behaviour
    • Threats to independence & Objectivity
      • Self Interest
      • Gifts and hospitality
      • Employment with the client
      • Overdue fees
    • Safeguards against threats to independence
      • For fee dependency: Engagement quality control review
      For gifts/hospitality: Document on audit file even if refused
      For owning shares: Any member of the audit team or immediate family must sell shares or be removed from the team
      For overdue fees: Do not perform further work until arrangements have been made for payment
      For business relationships: Unless immaterial no safeguard can reduce the threat so can't be done
      For potential employment with an audit client: Firm must be notified and the individual removed from the audit. Perform a review of any significant judgements made by the individual
    See similar decks