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B293 - Unit 3 - Coggle Diagram

- - - - Abide by law
    - - Acting ethically
    - - Makes a profit
    - - Doing good in the community
  - - - Recognise and meet demands
    - - Act in common interest
    - - Highest profit
  - - - Avoid abuses
      - Support and respect
    - - freedom of association
      - Right to collective bargaining
      - Elimination of forced labour
      - Elimination of child labour
      - Elimination of discrimination
    - - Eliminate corruption
    - - Precautionary approach
      - Promote greater responsibility
      - Encourage friendly technologies
  - - - Prosperity
      - Peace
      - People
      - Partnership
      - Planet
  - - - Value creation
      - Different capitals
        
        Intellectual
        
        Knowledge of workforce
        
        Human
        
        Contribution to profitability
        
        Manufactured
        
        Finished goods
        
        Social and relationship
        
        Suppliers, workforce and customers
        
        Financial
        
        Statements
        
        Natural
        
        Beneficial impact on environment
  - - - 102
        
        Contextual information
      - 103
        
        Impact management
      - 101
        
        Defines report content
  - - - Requires information to determine
      - Negative
      - Positive
    - - Identifies reactions
      - Achieve social impact
  - - - Internal
      - External
    - - Dominant
      - Auxiliary
  - - - Modify accordingly
      - Does not modify
- - - - e.g. Enron
        
        Largest bankruptcy
        
        Sarbanes Oxley Act 2002
        
        Three new rules
        
        Audit firm rotation
        
        Separation of services
        
        Stricter independence of non-exec directors
        
        Auditor guilty of obstructing justice
        
        Job losses for 100k employees
  - - - Greater steps between
        
        Professional managers
        
        Employees
  - - - External focus
        
        Accountability
        
        Accurate, fair and timely
        
        Inspection
        
        Reporting
        
        Audit
        
        Meet expectations set by
        
        Stakeholders
        
        Funders
        
        Regulators
      - Internal focus
        
        Policy formulation
        
        Setting and safeguarding
        
        Mission
        
        Values
        
        Long-term goals
        
        Put appropriate policies and systems in place
    - - External focus
        
        Supervision and monitoring
        
        Appoint and set reward for senior management
        
        Assess management performance
        
        Monitor KPIs
        
        Monitor financial and budget controls
        
        Manage risk
      - Internal focus
        
        Strategic thinking
        
        Agree and communicate direction
        
        Shape and agree long-term plans
        
        Undertake significant resource decisions
        
        Funding
        
        Allocating workforce
  - - - Vehicle to return wealth to stakeholders
      - Survive by managing and co-ordinating interests of shareholders
      - Adds value to society by operating sustainably and responsibly
    - - Narrow view
        
        Business purpose is to create wealth for shareholders
      - Broader view
        
        Meeting public interest?
        
        Behave in a way acceptable to public?
  - - - Information known must be equal
        
        Otherwise agent (senior management) can act against interests of principal (shareholders)
    - - Managers held legally accountable for business
        
        Incentivises god admin, governance and preparation of accounts
    - - Relies on market mechanisms
        
        Managers negotiate with
        
        Suppliers
        
        Employees
        
        Customers
        
        Creditors
        
        Shareholders
        
        Residual beneficiaries
        
        Monitoring controls
        
        Requirements in company law
        
        Incentive controls
        
        Bonuses payable on certain goals
        
        Options on company shares
      - Evolved into Jensen and Meckling's (1976) agency theory
  - - - Greater monitoring of executives
        
        Board to monitor
        
        Unitary
        
        Combines exec directors and NEDs
        
        Neds provide independent insight
        
        NEDs selected by board
        
        Dual
        
        Supervisory board of NEDs
        
        Oversees direction
        
        Executive board
        
        Runs the business
        
        Clearer distinction
  - - - 2015
        
        6 chapters
        
        Insitutional investors, stock markets and other intermediaries
        
        The role of stakeholders
        
        Rights and equitable treatment of shareholders and key ownership functions
        
        Disclosure and transparency
        
        Effective governance framework
        
        Responsibilities of board
      - Not mandatory
    - - Leadership and purpose
        
        Alignment of values, culture and policies
      - Division of responsibilities
        
        Board of directors independent from one another
      - Composition, succession and evaluation
        
        Board should possess correct skills and expertise
      - Audit, risk and internal control
        
        Ensure integrity of systems
      - Directors remuneration
        
        Rewarded in line with achievements
      - Mandatory for 'Premium listed' companies
  - - - Application
        
        More than 2000 employees
        
        Higher than £200m turnover
        
        At least £2b balance sheet
      - Purpose and leadership
      - Board composition
      - Director responsibilities
      - Opportunity and risk
      - Remuneration
      - Stakeholder relationships and engagement
- - - - External audit
    - - Non-audit work
        
        Compliance
        
        Regulatory
        
        Contractual
        
        Process or methodology
        
        Agreed upon procedures
        
        Auditor
        
        Client
  - - - External
        
        Independent 3rd-party
        
        Selected by business / board
        
        Acts on behalf of shareholders
        
        Statutory requirements and exemptions
        
        Independence and professional ethics
        
        Challenge when company appoints
        
        Personal relationship between parties
        
        International standards on auditing
        
        International Auditing and Assurance Standards Board (IAASB)
        
        Provide audit opinion to statements
        
        Comments on whether statements are true and fair
        
        Unmodified opinion
        
        Strongest statement
        
        Statements free from material misstatement
        
        Modified opinion
        
        Disclaimer
        
        Insufficient evidence
        
        Ineffective audit
        
        Adverse
        
        So bad going-concern is not warranted
        
        Qualified
        
        Material misstatements exist
        
        Misstatements are given by auditor
        
        Tasks undertaken
      - Internal
        
        Mandatory for large and public companies
        
        Conducted by employees
        
        Legally-bound to discuss findings with audit committee
        
        ISA 610 allows external auditors to use internal audit findings
        
        Assessment of internal controls
        
        Faithful, complete, appropriate, effective and valid
        
        Improves reliability of financial information
        
        Management attitudes toward controls
        
        Controls over informational systems
        
        Operational controls
        
        Should be designed as mixture of
        
        Detect
        
        Correct
        
        Prevent
        
        Examples
        
        Bank reconciliations
        
        Deters fraud
        
        Identifies discrepancies
        
        Discrepancies can be corrected
        
        Separation of duties
        
        Limit access on ERP
        
        4 more items...
        
        CoBIT
        
        Control environment
        
        Clearly defined
        
        2 more items...
        
        Control objectives
        
        Control practices
        
        Control activities
        
        Enablers
        
        Select
        
        Implement
        
        1 more item...
      - Statutory
    - - Main risk is financial accounts presented unfairly stated
      - Modified opinion given where statements are true and fair
      - Management
        
        Control
        
        Put in place
        
        Detect
        
        Correct
        
        Procedures
        
        Designed incorrectly
        
        Not operating in reality
        
        Detection
        
        Auditor misses errors
        
        Auditor finds errors which do not exist
        
        Inherent
        
        From financial statements
        
        Errors
        
        Accuracy
        
        Form
        
        1 more item...
        
        Validity
        
        Completeness
    - - No issues identified
        
        Business can trade for foreseeable future
        
        At least 12 months from date of financial statement
      - Not used if management intend to
        
        Cease operations
        
        No choice but to wind up
        
        Financially insolvent
        
        Liquidate business
      - If not warrented
        
        Business must prepare accounts as cash-only, no accruals
      - Tested by
        
        Evaluating directors assessment
        
        Obtain sufficient evidence during audit
        
        Conclude whether there is material uncertainty
        
        Examples
        
        Examine
        
        Cash flow
        
        Predict continuation of conditions to perform
        
        e.g. market is not in decline or obsolete
        
        Kodak
        
        Supplier relationships
  - - - Professional competence and due care
      - Confidentiality
      - Objectivity
        
        Conflict of interest
        
        Controls include
        
        Declaration of conflict
        
        Separation of services to different departments
        
        Strong internal controls
        
        Appropriate disciplinary procedures
      - Professional behaviour
      - Integrity
      - Threats
        
        Advocacy
        
        Familiarity
        
        Self-review
        
        Intimidation
        
        Self-interest
        
        Evaluate significance
        
        Do not violate professional ethics
    - - Develop alternative courses of action
      - Determine likely consequences of each proposed course of action
      - Determine affected parties and identify their rights
      - Decide on appropriate course of action
      - Identify ethical issue