PURPOSE -

1. Demonstrate an understanding of the nature of the corporate entity and be aware of the concepts, statutory requirements and other authoritative influences that underpin accounting and reporting in the Australian regulatory environment.

2. Explain the issues surrounding contemporary accounting controversies.

3. Evaluate solutions for routine accounting problems in diverse contexts using social, ethical, economic, regulatory and global perspectives.

ASSIGNMENT -

Joshua, an employee working in the accounts office of a medium-sized company listed on the Australian Securities Exchange, was working late one evening during the week. He realised he had left his pen in the boardroom at an earlier meeting and, given its value, went upstairs to look for it. As he walked past a room, he heard the following conversation between the Chief Executive Officer, Paul and one of the non-executive director, Alan who is also a cousin of Paul:

Paul: I am deeply concerned that if this fall in profit figures is disclosed in the next annual report, there will be all sorts of problems with the shareholders. We may even lose a number of big investors.

Alan: Well, I suppose we could always find a way of making them look better.

Paul: How? I can't see it at all.

Alan: Well, we could make them just slightly higher than last year's figures by including the proceeds of the sales of our toothbrush division.

Paul: But the sale doesn't go through until October.

Alan: No, but it will ... and it doesn't make much difference, we need the money on the books now.

Paul: But when the accounts are signed off, won't that be fraudulent?

Alan: Not really ... I don't see why ... it's just a manipulation of timing rather than numbers.

Paul: OK. That sounds good to me. Let?s sort it out now."

Joshua left and spent the evening worrying about what he should do, if anything. He decided he would anonymously ask the accountant how he could deal with this situation, and bring the issue out into the open.

As the accountant, you receive a report from the employee (Joshua) about the conversation.

Write a brief summary for board members of the corporate governance problems raised by this employee, and the weaknesses in the company's corporate governance which are evident from the conversation which was overheard.

ASSESSMENT CRITERIA -

Your grade will be determined by the following:

Ability to explain what is corporate governance and what is considered as good corporate governance under the different theories.

Analyse the situation faced by the company and the weaknesses in the company's corporate governance;

You need to support your understanding of corporate governance and earnings management with references/citations from credible sources that you may have read from academic journals or books.

Coherence and organisation of the paper including referencing, spelling, grammar and editing.