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BFA502 CPA Ethics And Governance

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BFA502 CPA Ethics And Governance

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Course Code: BFA502
University: University Of Tasmania

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Country: Australia


Identify Current Government Governance Issues?


The reported study has been developed to identify the current governance issues in the management of Ethical Hemp Ltd that are not in accordance with the principles of the AXS listing rules or OEDC principles. Precisely, as the organisation is determined to list the company according to the Australian listing rules, identification of the corporate governance issues will be evident to rectify the changes as soon as possible. The study has also outlined the recommendation leading towards change so that the corporate governance aspects will be perfectly fitted with the principles of the AXS listing rules or OEDC corporate governance principles (Jesover and Kirkpatrick, 2015). By identifying the corporate governance issues that are not suitable for the listing criteria and guidelines, the study has evaluated what should be the approach of the management of Ethical Hemp Ltd to eradicate the corporate governance issues. However, the study also identifies the methods to lead with the issues that are not connected to corporate governance of the company.
Current Governance Issues
By considering the facts delivered in the case study one, the current governance issues that are not in accordance with the principles of the AXS listing rules or OEDC corporate governance principles have been illustrated in this particular section as follows:
Inefficiency in decision-making
In the current business context, inefficiency in decision-making has been identified as one of the leading governance issues in Ethical Hemp Ltd. For instance, during the crucial decision-making of the firm, the Board of Directors and Senior Internal Accountant of the company have not participated in the decision-making process. Alternatively, the Junior Accountants have been given the responsibility to make the crucial financial accounting decisions (Young, 2009). Therefore, it is one of the most comprehensive corporate governance issues within Ethical Hemp Ltd.
Lack of Disclosures
The financial management of Ethical Hemp Ltd has lacked financial disclosure required to be provided in the financial statements. For instance, in the corporate governance regulations of OEDC, companies need to provide disclosures on a regular interval. On the other hand, the draft financial statement of Ethical Hemp Ltd has not been included any bank statements. Therefore, the presented financial reports cannot be verified by the disclosures (Okpara, 2011). Clearly, such practices are an issue in corporate governance of the firm.
Lack of Social Responsibility
 Ethical Hemp Ltd has ignored the community improvements programmes in the recent times. For instance, the board has identified that the management has wasted the allocated funds for community improvements programmes (Edwards and Wolfe, 2007). Hence, lack of social responsibility has been identified as the major drawback in the corporate governance of Ethical Hemp Ltd. Therefore, the management must look into the issue to correct the disciplines in corporate governance.
Lack of Transparency
In the business dynamics, the management of Ethical Hemp Ltd has displayed a lack of transparency by utilising the fund allocated for community improvements purpose. As a result of the scenario, such loopholes in the management can be defined as one of the serious corporate governance issues in the context of the business (Dr. B.Vijaya and Arunkumar. B, 2012). The auditors must consider the identified corporate governance issue so that transparency in the spending of the fund can be maintained according to the order. Otherwise, the company may have to face substantial problems based on the issue.
Viability Issue in Business
According to the proposal of the board meeting of Ethical Hemp Ltd, administrative have defined that the company may have lost the viability of the business. As the organisation has spent substantial cash flow in the expansion of the business in the European market, funding issue has been created significant challenges in corporate governance. Hence, increase in expenditure has resulted in viability issue in business (Shipley and Kovacs, 2008).
Recommended Changes
On the basis of the above corporate governance issues and requirements to be met for becoming a listed member of ASX, the following changes have been recommended to Ethical Hemp Ltd:

Make timely and balanced disclosure: A listed company must make timely and balanced disclosure of all aspects to the reasonable person. Ethical Hemp Ltd. must develop a written disclosure policy and present the policy to the stakeholders in order to develop trust among the investors. Ethical Hemp Ltd. must disclose all sorts of financial information to the investors and other stakeholders of the firm who would expect to have a material effect on the value and price of its securities (Gnecchi, 2016).
Act ethically and responsibly: The reputation of a listed entity is one of the valuable assets of the company. In other words, losing the reputation may lead to adverse consequences for the management and its employees. The stakeholders and investors of the entity expect the firm to act ethically and responsibly (Gnecchi, 2016). Ethical Hemp Ltd. must maintain a code of conduct for its employees, senior executives and directors. On the other hand, the company must disclose the code or a summary to the stakeholders. The management of Ethical Hemp Ltd must put a check on the wastage of the allocated funds for community improvements programmes in order to maintain its financial status.

Irrespective of the recommendations for the issues discussed in the above section, the Ethical Hemp Ltd. needs to make several other changes in order to get listed on the ASX. The recommendations for other issues are discussed herein below:

Lay solid foundation for management and oversight: Ethical Hemp Ltd. must develop the roles and responsibilities of its board members and management. On the other hand, the company must establish performance standards to monitor and evaluate the hard work of the board members and high level executives (Hirschey, John and Makhija, 2014). The changes will develop a systematic way of operations and establish a corporate culture in the organisation.
Respect the right of security holders: Ethical Hemp Ltd. must develop a policy to respect the rights of the stakeholders and investors. The management must provide adequate facilities and information to the stakeholders to allow them exercise their rights effectively. The management must develop a communication plan to openly and honestly communicate the proceedings of the firm (Sheikh and Rees, 2015). Additionally, the management must encourage and facilitate the participation of the stakeholders in the meetings. Finally, the management of Ethical Hemp Limited must check that the stakeholders have ready access to the information about the company and its governance.
Recognise and manage risk: If Ethical Hemp Limited wants to get listed on the ASX it must establish a sound risk management framework (Sharvani, 2011). On the other hand, the company must review the effectiveness of the framework periodically to keep the investment of the stakeholders safe. Ethical Hemp Limited must develop a committee to identify the risk and monitor them in order to safeguard the investment and efforts of the stakeholders.

By considering the above analysis, Ethical Hemp Ltd faces different issues of corporate governance that negatively impacts the capability of the company to become an ASX listed company. The lack of disclosure of adequate information, inefficiency in decision making and lack of social responsibility adversely impacts the reputation of the firm. Ethical Hemp Ltd needs to make changes in its corporate governance policy and focus on acting ethically to meet the criteria of getting listed on the ASX. On the other hand, the company needs to make further changes in its policies to manage the future issues and get listed on the ASX list.
Dr. B.Vijaya, D. and Arunkumar. B, A. (2012). Corporate Governance: Some Issues. International Journal of Scientific Research, 2(12), pp.90-92.
Edwards, J. and Wolfe, S. (2007). Ethical and Compliance-Competence Evaluation: a key element of sound corporate governance. Corporate Governance: An International Review, 15(2), pp.359-369.
Gnecchi, F. (2016). Corporate Governance Communications. Symphonya. Emerging Issues in Management, (1).
Hirschey, M., John, K. and Makhija, A. (2014). Corporate governance. 1st ed. Oxford: Elsevier JAI.
Jesover, F. and Kirkpatrick, G. (2015). The Revised OECD Principles of Corporate Governance and their Relevance to Non-OECD Countries. Corporate Governance, 13(2), pp.127-136.
Okpara, J. (2011). Corporate governance in a developing economy: barriers, issues, and implications for firms. Corporate Governance: The international journal of business in society, 11(2), pp.184-199.
Sharvani, B. (2011). OECD Principles on Shareholder Rights. Indian Journal of Corporate Governance, 4(2), pp.52-59.
Sheikh, S. and Rees, W. (2015). Corporate governance & corporate control. 1st ed. London: Cavendish.
Shipley, R. and Kovacs, J. (2008). Good governance principles for the cultural heritage sector: lessons from international experience. Corporate Governance: The international journal of business in society, 8(2), pp.214-228.
Young, S. (2009). Contemporary issues in international corporate governance. 1st ed. Prahran, Vic.: Tilde University Press.

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