Corporate Governance General Questions Accounting Essay

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This section deals with the data collected from the field of study. As already stated, those data were extracted from the returned questionnaire collected from 26 of 40 quoted financial institutions.

To present the findings and analyse them so as to reach a conclusion on the research topic hypothesis which will be formulated for the analysis.

The questionnaire as mentioned in chapter 3 were broken down into different sections and the analysis performed accordingly using the SPSS 16.0 software.

Table 1 Questionnaire administration/distribution: To quoted companies.

Total number of administered questionnaire

40

Total returned

26

Response rate (%)

65%

Source: Questionnaire

From table 1 it can be seen that 40 questionnaires were issued and of these 26 were returned. This represents 65% of the total number administered. The low response rate may be indicative of the non-interest or an unwillingness to disclose confidential matters.

4.1 Section A Corporate Governance General Questions

Q1."Corporate Governance is a system by which corporations are directed and controlled." Sir Adrian Cadbury (1999)

Frequency

Percent

Valid Percent

Cumulative Percent

Valid

strongly agree

4

15.4

15.4

15.4

agree

14

53.8

53.8

69.2

neutral

8

30.8

30.8

100.0

Total

26

100.0

100.0

Table 1: CG general Q1

Upon being asked about the definition of CG, some of the respondents, i.e. 69.2% consent to the statement, 30.8% remained undecided as seen in Table 1 and seconded by the pie chart 1. Analysis suggests that CG is no longer alien to the Mauritius Financial sector inferring that all respondents are familiar with the term, CG.

Chart 1: CG general Q1

Q2.Your institution is conscious about the requirements contained therein the Code of Corporate Governance of Mauritius.

Frequency

Percent

Valid Percent

Cumulative Percent

Valid

strongly agree

4

15.4

15.4

15.4

agree

15

57.7

57.7

73.1

neutral

6

23.1

23.1

96.2

disagree

1

3.8

3.8

100.0

Total

26

100.0

100.0

Table 2 CG general Q2

From table 2, some mix responses to the statement were obtained. While the majority of respondents are aware of the concept of CG, 23.1% were unsure and 3.8% disagreed. This is also represented by a histogram. The result from the above analysis goes to confirm that the Mauritius Financial institutions, on the whole, no longer need awareness on CG since the introduction of the Code of CG. The relevant question to be asked is whether this is clearly reflected in their annual report and effectively put into practice.

Chart 2: CG general Q2

The histogram shows the graphical representation of the responses including the low standard deviation value of 0.732 which enhances the interpretation that the data points tends to be close to the mean value of 2.15,thereby leading to the confirmation of good awareness of CG requirements.

Q3. The Code is effectively abided by your company since its implementation.

Frequency

Percent

Valid Percent

Cumulative Percent

Valid

Strongly Agree

2

7.7

7.7

7.7

Agree

12

46.2

46.2

53.8

Neutral

10

38.5

38.5

92.3

Disagree

2

7.7

7.7

100.0

Total

26

100.0

100.0

Table 3 CG general Q3

Table 3 indicates that 7.7% who strongly agree and 46.2% who concur that since the publication of the Code, it is effectively abided while a small proportion, 38.5% declined to respond and 7.7% opposed the statement. The annual report disclosures appear to indicate a positive move towards adopting the CG code but there seems slight evidence of high or complete compliance with the surveyed items among the majority of listed companies. This is equally interpreted in the bar chart in Chart 3.

Chart 3: CG general Q3

Hypothesis 1: 'Your Company is fully aware of the requirement of the Code' & 'The code is effectively abided by your company since its 11111111111111implementation'.

The respondents were expected to provide the same reply to Question 2 and 3, as knowledge of the Code and its subsequent implementation are directly correlated. To verify this hypothesis, the Pearson Correlation statistical test has been used.

H0: There is no correlation between ''Your Company is fully aware of the requirement of the Code' & ' The code is effectively abided by your company since its implementation'.

H1: ''Your Company is fully aware of the requirement of the Code' & 'The code is effectively abided by your company since its implementation' are correlated.

Correlations

Your institution is conscious about the requirements contained therein the Code of Corporate Governance of Mauritius.

The Code is effectively abided by your company since its implementation

Your institution is conscious about the requirements contained therein the Code of Corporate Governance of Mauritius.

Pearson Correlation

1

.677*

Sig. (2-tailed)

.011

N

13

13

The Code is effectively abided by your company since its implementation

Pearson Correlation

.677*

1

Sig. (2-tailed)

.011

N

13

13

*. Correlation is significant at the 0.05 level (2-tailed).

Table 4: Correlation between variable Q2 and Q3

The Pearson Correlation in Table 4 shows a p-value < 0.05 (2- tailed test at 95% significance level) which implies that there is a significant correlation between the 2 variables. Therefore H0 is rejected in favour of H1, demonstrating and confirming a relationship between Question 2 and Question 3.

4.2 Section B Board of Directors and Committees

Q1. The roles and responsibilities of the Board, Senior Management, Non Executives and Independent Directors well defined in your company?

Frequency

Percent

Valid Percent

Cumulative Percent

Valid

strongly agree

2

7.7

7.7

7.7

agree

7

26.9

26.9

34.6

neutral

13

50.0

50.0

84.6

disagree

4

15.4

15.4

100.0

Total

26

100.0

100.0

Table 5 Board of Directors and Committees Q1

Chart 4 Board of Directors and Committees Q1

Table 5 and Chart 4 shows that there was a strong unwillingness from the respondents to divulge an answer to the statement. A massive 50% responded to 'Neutral', 15.38% disagreed, while 26.92% and 7.69% agreed and strongly agreed.

Statistics

N

Valid

26

Missing

0

Mean

2.73

Std. Deviation

.827

Table 6 Board of Directors and Committees Q1

The Standard deviation (0.827) shows a variation about the mean (2.73) and this may be attributed due to an unwillingness of disclosure of confidential information or difficulty in defining non executive and independent directors in terms of their roles and objectives in the companies. It is hard to judge from Table 6 any sort of compliance with Section 2.5.4 of the CG code.

Q2. As defined by the Code of CG in Mauritius, all companies should have at least two independent directors. Your company abides by this statement.

Frequency

Percent

Valid Percent

Cumulative Percent

Valid

Strongly Agree

20

76.9

76.9

76.9

neutral

4

15.4

15.4

92.3

disagree

2

7.7

7.7

100.0

Total

26

100.0

100.0

Table 7 Board of Directors and Committees Q2

Chart 5 Board of Directors and Committees Q2

Table 7 and Chart 5 show that the majority of respondents, 76.9% comply with Subsection 2.2.2 of the Code of Corporate Governance while 15.4% refused to respond and 7.7% opposed the statement. This is supported as well in the ARs where 76.9% abide by the Code, having more than 2 independent directors operating in their Companies. One of the companies provided sound justification for not having independent directors. The main reason is that the Board is entirely satisfied that the executives and the non-executives directors are independent both in character and judgment.

Q.3 How many Directors are presently serving on your board?

Question 3 of Section B was designed in a disguised form of question 6 so as to confirm reliability of the subject matter. It can be seen that only 23.1% do not abide by the Code and thus it is quite reliable.

Statistics

Q4. The establishment of an audit and Corporate Governance committee contributes in improving Corporate Governance.

N

Valid

26

Missing

0

Mean

1.85

Std. Deviation

.368

Table 8 Board of Directors and Committees Q5

Q4. The establishment of an audit and Corporate Governance committee contributes in improving Corporate Governance.

Frequency

Percent

Valid Percent

Cumulative Percent

Valid

strongly agree

4

15.4

15.4

15.4

agree

22

84.6

84.6

100.0

Total

26

100.0

100.0

Table 9 Board of Directors and Committees Q4

In respect to the foundation of committees, companies are required to have at least an audit committee and a CG committee. All companies do meet this requirement as per Table 8 with mean 1.85 implying a high rate of concurrence. This is validated as well in the ARs where 100% consent to having both an audit and CG committee.

Q.5 Meetings between such committees and the Board are disclosed in your annual report.

Frequency

Percent

Valid Percent

Cumulative Percent

Valid

strongly agree

13

100.0

100.0

100.0

Table 10 Board of Directors and Committees Q5

The number of times in a year committees met must be disclosed in the AR (Section 8.4 Board Meetings) as stated in the Code and it was widely expected that those companies having committees should abide by the principle. There is modest mention of committee's meeting and the Board in the surveyed company's AR (100% as per Appendix ???), Table 10 shows evidence of compliance.

Hypothesis 2: 'The establishment of an audit and a CG committee plays an important role in improving corporate governance' & 'Meetings between such committee and the Board are disclosed in the AR'

It was expected that respondents having an audit and CG committee were supposed to have regular meetings as the circumstances aroused as per the CG code and reflected in their AR.

H0: There is no correlation between' The establishment of an audit and a CG committee plays an important role in improving corporate governance' & 'Meetings between such committee and the Board are disclosed in the AR'

H1: The establishment of an audit and a CG committee plays an important role in improving corporate governance' & 'Meetings between such committee and the Board are disclosed in the AR' are correlated.

General Analysis of Section B- corriz partou akoz correlation??????/

4.3 Section C Secretarial Function and Monitoring

Q1.The ideal corporate secretary (CS) should have a background as a financial professional, an attorney or a lawyer. Your company deems these attributes as important when appointing a CS.

Frequency

Percent

Valid Percent

Cumulative Percent

Valid

strongly agree

14

53.8

53.8

53.8

agree

6

23.1

23.1

76.9

neutral

4

15.4

15.4

92.3

disagree

2

7.7

7.7

100.0

Total

26

100.0

100.0

Table 11 Secretarial Function and Monitoring Q1

Results obtained from table 11 with 76.9% who agreed to the statement, may indicate that the company's CS appointed is based as per his/her attributes, experience and qualification while 15.4% remained neutral.

While most AR surveyed (91.75%) provided written details of their previous experience and qualification, The Metropolitan Corporate Counsel, (April 2005), argued that irrespective of his/her professional background, the CS is going to have to work closely with the Board, have a commitment to the highest ethical and professional standard in relation to the company's ambition

Chart 6 Secretarial Function and Monitoring Q1

The CS needs to maintain the vital communication link between the board and the company so as to enhance and stay up to date with corporate changes. Chart 6 with 23.08 % agreeing and 76.9 % strongly abiding, there is indication that the CS is highly accountable to the board as a whole. While the basic duties of the CS has been outline in some ARs, their overall responsibilities, and the fit of their role within senior management such as good working knowledge of the corporate, legal and regulatory matters which may come up at a meeting are necessary attributes a CS should possess.

4.4 Section D Risk management, Internal Control and Internal Audit

Chart 7 Risk management, Internal Control and Internal Audit Q1

From Chart 8, 69.2% and 15.4% recognize the responsibility of the Board regarding Internal Control. Disclosure in ARs also demonstrates that all institutions have a statement acknowledging the director's responsibilities for Internal Control, fulfillment of Subsection 5.4 of the Code.

Q2.Internal audit are given the responsibility to assume the function of risk management.

Frequency

Percent

Valid Percent

Cumulative Percent

Valid

strongly agree

14

53.8

53.8

53.8

agree

8

30.8

30.8

84.6

neutral

2

7.7

7.7

92.3

strongly disagree

2

7.7

7.7

100.0

Total

26

100.0

100.0

Table 12 Risk management, Internal Control and Internal Audit Q2

The primary goal of an internal audit is to evaluate a company's risk management and not to assume the entire responsibility of risk management which forms part of the duty of the board. The majority 53.8% and 30.8%, who strongly agreed and agreed respectively, abide to the fact that they are accountable to the Internal Audit for the designing, implementing and monitoring of risk management as per a statement in their AR (84.6%) acknowledging their responsibility for the risk management process. Companies who negated the statement stated grounds for not establishing an internal audit function, that is due to the nature of the company's business.

4.5 Section E Accounting and Auditing

Response to Q1 provided a complete conformity of 100% with a high mean of 1.08, of the importance of an audit committee to their company, as approved by Mangema and Chamisa (2008) while Q2 was designed mainly to assess its credibility in a specific company. Results from Table 12 illustrate that 30.8% who strongly disagreed and 53.8% who also negated, provided safe conclusion that the magnitude of an Audit committee is no longer put into question.

Q2. The reason why your company is implementing the provisions regarding audit committee is because it forms part of the Code

Frequency

Percent

Valid Percent

Cumulative Percent

Valid

agree

2

7.7

7.7

7.7

neutral

2

7.7

7.7

15.4

disagree

14

53.8

53.8

69.2

strongly disagree

8

30.8

30.8

100.0

Total

26

100.0

100.0

Table 13 Accounting and Auditing Q2

Hypothesis 3:'The importance of an audit committee & the reason for implementing its provision'

A measure of association between the variables was tested between, Q1 and Q12, to confirm the proposition, that any company having an audit committee was implemented, whether because it forms part of the Code, is valid or not.

H0: There is no association between Q1 & Q12.

H1: The variable Q1 & Q2 are associated.

Chi-Square Tests

Value

df

Asymp. Sig. (2-sided)

Pearson Chi-Square

4.875a

3

.181

Likelihood Ratio

5.104

3

.164

Linear-by-Linear Association

2.586

1

.108

N of Valid Cases

26

6 cells (75.0%) have expected count less than 5. The minimum expected count is .15.

Table 14 Chi-Square Tests between Q1 & Q2

The results prove that since the p-value > 0.05 (.181) with a 2 -tailed test at 95% significance level, it confirms the fact that there is no association between Q12 & Q13 thereby understating the implementation of an audit committee just for the sake of the code.

Q.3 Quarterly/Monthly accounts are prepared in compliance with the International Financial Reporting.

Q3 provided full conformity as to the importance of preparing financial statement in accordance with the IFRS sustained by the high rate of disclosure in their AR.

Q4. External auditors provide an independent and objective check on the way in which the financial statements have been prepared and presented.

Frequency

Percent

Valid Percent

Cumulative Percent

Valid

strongly agree

15

57.7

57.7

57.7

Agree

9

34.6

34.6

92.3

Neutral

2

7.7

7.7

100.0

Total

26

100.0

100.0

Table 15 Accounting and Auditing Q4

Table 15 provides no question mark on the independence of external auditors in relation to financial statements prepared thereby protecting the private interest of the shareholders. While Results obtained 57.7% who strongly agreed and 7.7% who escaped a response, may highlight a major source of strength for effective CG. The biggest scandal in the 21th century, Enron, was an issue which attracted international concern and involved a reputable auditor firm, Arthur Anderson who served Enron as an internal as well as an external auditor .The firm was involved in the violation of Corporate rule and regulation.

The MCB/NPF scandal, where internal and external auditors were for several years fooled was another issue. The results obtained from the current study indicate non-recurrence of this situation. This implies that most companies, 61.5% have learnt lessons from recent scandals.

4.6 Section F Integrated Sustainability Reporting

Q1 of this section required respondents to answer a simple yes or no and the question was "Does your company's Annual Reports cover policies and practices relative to Ethics, Environment, Health and Safety and Social Issues?" As per results obtained, it is clear that companies are committed to the highest standards of integrity and ethical conduct in dealing with all its shareholders and have developed and implemented social, safety, health and environmental policies and practices that, in all material respects, comply with existing legislative and regulatory frameworks and which is annually affirmed in the ARs (100%).

Q2 Exemplary standards of conduct and ethical practice should be promoted, both internally and externally for good governance.

Frequency

Percent

Valid Percent

Cumulative Percent

Valid

strongly agree

18

69.2

69.2

69.2

agree

8

30.8

30.8

100.0

Total

26

100.0

100.0

Table 16 Section F Integrated Sustainability Reporting Q2

As required by Subsection 7.3.6 the Code, 69.2% while 30.8% who strongly agree and agree respectively suggest the importance of adopting of a Code of Ethics for efficient governance.

4.7 Section G Communication and Disclosure

Chart 8 Communication and Disclosure Q1

As stated by the Code of CG (2004, p.18), companies are required in their AR, to affirm the extent of compliance with the code and must identify and give reasons for non compliance. From chart 8 46.2%, disapprove and strongly disagreed disclosure of non-compliance, 38.5% refused to respond. 15.4% did provide evidence of compliance. While disclosure in ARs are quite suggestive of compliance (75.86%),without ever providing relevant information on items being complied or ,provide the disclosure of ambiguous or occasionally inconsistent statement of adoption to the code, the current survey provide another picture of the issue. Low level of disclosure may also have been attributed as a 'private' or 'confidential' nature of business activities.

Q2.Stakeholders do not have access to potentially embarrassing and sensitive information.

Frequency

Percent

Valid Percent

Cumulative Percent

Valid

agree

3

11.5

11.5

11.5

neutral

10

38.5

38.5

50.0

disagree

13

50.0

50.0

100.0

Total

26

100.0

100.0

Table 17 Section G Communication and Disclosure Q2

Full disclosure of financial and non financial information is a requirement of the Code as per Section 8.2 and results obtained from Table 17 shows that 11.5% agreed that public disclosure of disconcerting information is avoided while 38.5% evaded a response and 50% disagreed with the statement. The OECD (2004) framework clearly states 'The CG framework should ensure timely and accurate disclosure on all material matters, including financial situation, performance, ownership and governance of the company.'

The Cadbury report (1992) also stated 'The lifeblood of markets is information and barriers to the flow of relevant information represent imperfection in the market…The more the activities of companies are transparent ,the more accurately will their securities be valued.'

4.8 Section H Miscellaneous Questions

Chart 9 Section H Miscellaneous Questions Q1

From Chart 9, 22 respondents representing 84.6% agreed weak CG deteriorates a company's potential which thereby leads to financial difficulties and frauds. Latest high profile financial scandals have raised concerned about the worthiness of CG.

Chart 10 Section H Miscellaneous Questions Q2

A hefty 61.6% agreed that good CG has added to the success and reputation of their Company escaping bankruptcy, corruption and wastes while 38.5% eluded an answer.

Reaction to Q3: How do you feel about the present Code of Corporate Governance?

Some respondents evaded that question while one of the Senior Managers provided the stated reasoning.

'The present Code is not the Law and therefore one is not obliged to comply by it.'

While another expressed a different opinion,

'The present Code is effective such that Top Management understands how a company should be governed properly.'

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