Corporations And Securities Legislation

Academic Anxiety?

Get an original paper within hours and nail the task

156 experts online

Free Samples

Corporations And Securities Legislation

.cms-body-content table{width:100%!important;} #subhidecontent{ position: relative;
overflow-x: auto;
width: 100%;}

Corporations And Securities Legislation

0 Download5 Pages / 1,113 Words

Question:
Discuss about the Corporations and Securities Legislation.

Answer:
Introduction:

The Corporations Act, 2001[1] provides the rules for governance of the companies in Australia. Under section 198A(1) of this act, the business of the company is to be run on the directions of the directors of the company[2]. As a result of this, the board of the company becomes a key body. The audit committees preside over the financial functions of the company, which makes this committee, another crucial body for the company. And so, the members who form a part of the board of the company and its audit committees have to be carefully elected. An attractive pool for selection of members of these two bodies is the retired audit firm partners. The reason for deeming as an attractive pool stems from their knowledge of the company’s position and also regarding their field, where they get ample exposure[3]. However, this puts a question over their autonomy and their impartial behaviour towards the company. In this regard, an independence test becomes crucial before bringing such members on board. The following discussion revolves around the need for this independence test.
The financial statements of any company have to be audited in a proper manner. There is a need for the financial statements to be prepared in a manner that a true and fair position of the company is depicted. This is also important with regards to making certain that there is proper corporate governance in the company and that its capital market functions are performing in a correct manner. The validity of the financial statements is enhanced when the audit of the financial statements is done in a proper manner, which not only allows the company to make sound capital decisions, but also helps in bringing the cost of capital, down. The former audit partners are usually aware off the laws and conditions of the company and upon them joining the board, they can certainly help in the betterment of the company, and also in fulfilling the requirement covered under section 297 of this act, which requires the company’s financial statements to show a fair and true view of the performance and position of the company for the particular period for which it has been drawn[4].
Before bringing such retired ex-audit firm members on audit committee or the board of the company, they are required to fulfil the independence criteria. A statutory requirement of the nation requires a general standard of independence to be adopted. Subdivision 3[5] of Part 2M.4[6] of this act provides the provisions for the independence requirement of a former auditor. Under this section, there has to be absence of any and all conflict of interest. This means that in any situation, such a condition should not be formed where the auditor deliberately avoids, or fails to exercise fairness and instead opt for prejudice while conducting audit. This is with a particular reference to the provisions covered under 324CD of the Corporations Act law[7].
There is also a need to fulfil the requirements of autonomy which are stated in Division 3, 4 and 5 of Part 2M.4 of this act, along with section 307C[8]. Apart from the statutory requirements, ASIC has also stated that there is a need fulfil the professional obligations in terms of the APES 110 Code of Ethics for Professional Accountants, Auditing Standard ASA 220 Quality Control for an Audit of a Financial Report and Other Historical Financial Information and Auditing standard ASQC 1 Quality Control for Firms that Perform Audits and Reviews of Financial Reports and Other Financial Information, and Other Assurance Engagements[9].

The independence test is deemed as a subjective one. When a person deploying logical approach infers the pertinent information in a rational way, which the person has access to, or the auditor has the access too owing to particular situation and their relationship with the other person should not lead to such a situation where the auditor acts in a prejudiced manner[10]. If there is an ounce of prejudice or bias, the independence test would not be fulfilled. There is a need for the auditor thus, to be constantly objective in mind and in appearance. The particular situation thus becomes the key aspect which is faced by the auditor and which has to be looked after, in addition to the client-auditor relationship. Where the independence test is fulfilled, the creditors and the investors, both stay positive towards the financial statements and the faith in the same is increased[11].
The independence test for the former auditors has been a matter of focus in the recent time period, particularly when they gain a seat on the audit committee or the board of the company, which had been their client. Owing to this, some serious issues have been identified by certain set of stakeholders, which mostly relate to the contravention of autonomy by such auditors. Where such a violation occurs, the autonomy of the company is affected, along with that of the audit form. This is because the former auditor of the firm goes on to join the audit client[12]. Such former audit partners have the influencing power over the audit firm, and this can lead to a pressure on the firm to do something which is not right for their audit, just to put the financial position of the company, in a better light. This not only dupes the stakeholders of the company, but also put the audit firm in question. There can also be an ignorance of due diligence and undue use of information of the company or of the other firms in which the former auditor conducted audits, to favour the company in which they become the board member or the audit committee member[13].
Hence, it can be concluded that there is a need for independence test to be adopted strictly, particularly when the former audit firm member joins the board of the company, or its audit committee. This is necessary for upholding the interests of the different stakeholder associated with the company, along with fulfilling the statutory requirements.

Bibliography
Bottomley PS, The Constitutional Corporation: Rethinking Corporate Governance (Ashgate Publishing, Ltd., 2013)
CCH Australia Limited, Australian Corporations & Securities Legislation 2011: Corporations Act law 2001, ASIC Act 2001, related regulations (CCH Australia Limited, 2011)
Clarke F and Dean G, Indecent Disclosure: Gilding the Corporate Lily (Cambridge University Press, 2007)
Plessis JJD, Hargovan A and Bagaric M, Principles of Contemporary Corporate Governance (Cambridge University Press, 2nd ed, 2010)
Corporations Act, 2001 (Cth)
ASIC, Auditor independence and audit quality (2014)
Guy DM, and Zeff SA, Retired Audit Firm Partners on Boards: Independence Considerations (2017)

Free Membership to World’s Largest Sample Bank

To View this & another 50000+ free samples. Please put
your valid email id.

E-mail

Yes, alert me for offers and important updates

Submit

Download Sample Now

Earn back the money you have spent on the downloaded sample by uploading a unique assignment/study material/research material you have. After we assess the authenticity of the uploaded content, you will get 100% money back in your wallet within 7 days.

UploadUnique Document

DocumentUnder Evaluation

Get Moneyinto Your Wallet

Total 5 pages

PAY 3 USD TO DOWNLOAD

*The content must not be available online or in our existing Database to qualify as
unique.

Cite This Work
To export a reference to this article please select a referencing stye below:

APA
MLA
Harvard
OSCOLA
Vancouver

My Assignment Help. (2018). Corporations And Securities Legislation. Retrieved from https://myassignmenthelp.com/free-samples/corporations-and-securities-legislation.

“Corporations And Securities Legislation.” My Assignment Help, 2018, https://myassignmenthelp.com/free-samples/corporations-and-securities-legislation.

My Assignment Help (2018) Corporations And Securities Legislation [Online]. Available from: https://myassignmenthelp.com/free-samples/corporations-and-securities-legislation[Accessed 19 December 2021].

My Assignment Help. ‘Corporations And Securities Legislation’ (My Assignment Help, 2018) accessed 19 December 2021.

My Assignment Help. Corporations And Securities Legislation [Internet]. My Assignment Help. 2018 [cited 19 December 2021]. Available from: https://myassignmenthelp.com/free-samples/corporations-and-securities-legislation.

×
.close{position: absolute;right: 5px;z-index: 999;opacity: 1;color: #ff8b00;}

Thank you for your interest
The respective sample has been mail to your register email id

CONGRATS!
$20 Credited
successfully in your wallet.
* $5 to be used on order value more than $50. Valid for
only 1
month.

Account created successfully!
We have sent login details on your registered email.

User:

Password:

Getting nightmare regarding pending chemistry assignment? Then it is high time you consider hiring chemistry assignment help service of MyAssigemnthelp.com. We at MyAssignmenthelp.com deliver quality subject specific assistance on more than 100+ subjects. For us, students’ need is foremost, and we work round the clock to offer science, humanities and commerce assignment help. Among Commerce wing, our one of the most popular services is capital budgeting assignment help. In science segment, we have gained popularity with biology assignment help.

Latest Business Law Samples

div#loaddata .card img {max-width: 100%;
}

BU1112 Business Law
Download :
0 | Pages :
6

Course Code: BU1112
University: James Cook University