Deloitte Touche Tohmatsu Limited Accounting Essay

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The sole purpose of this assignment was to choose two organizations at students own discretion. For this purpose, two distinct organizations one in the private sector and one not in the private sector to compare both organizations in terms of the legal and regulatory distinctions between the two. The two organizations chosen are as follows;

Eland Oil and Gas PLC.

Deloitte Touche Tohmatsu Limited

Specifically, there are certain restrictions and application of the provision of law (Companies Act 2006). Furthermore, it also helps to distinguish the two entities with reference to the Combined Code of Corporate Governance issued by the London Stock Exchange.

The difference have been concisely pointed out and adequately disclosed. Moreover, the roles of managers in making business decisions pertaining to these organizations and to whom they are held accountable has also been briefly discuss as per requirement.

Eland Oil and Gas PLC. (Public Listed Company)

Company Overview

Eland Oil and Gas PLC. Was incorporated on August 28, 2009 under Companies Act 2006. The registered head office of the company is located at 17 Abercrombie Court Prospect Road Westhill Aberdeen Scotland, United Kingdom. As of the date of its incorporation it was deemed to own all the properties, rights, assets, obligations and liabilities. The company is engaged in the exploration and production of oil and natural gas resources, including production and sale of oil and gas and related activities. The company has commenced its operations in May 2010 with its principal business objective of acquiring interests in oil and gas assets in West Africa particularly Nigeria. The company has also its offices in Nigeria (Abuja) and United Arab Emirates (Sharjah).

The company is listed on London Stock Exchange PLC under Alternative Investment Market (AIM) after it made its initial public offering of securities on September 03, 2012 offering 134,871,982 ordinary shares at rate of £ 1 per share. The numbers of shares exclude options that are available to directors and management totalling 20,000,000 and there are restrictions on the transfer of the company's shares.

Core Operating Areas

The company engages in the exploration and production primarily in Nigeria which is its major oil producing region where it has executed a binding acquisition agreement to acquire a 45 percent participating interest in an onshore mining lease in Nigeria known as OML 40 from Shell Petroleum Development Company of Nigeria.

Corporate Governance Structure

The company has a competent and experienced team of board of directors and the management who are responsible for the overall major activities and operations relating to the business of the company. The Board takes all the strategic decisions within the jurisdiction of the authority signed and they are ultimately accountable to the shareholders of the company. The members of the Board and the management team along with their designations are listed as follows;

Board of Directors

S#

Name

Designation

1

Ian Les Blair

Chief Executive Officer

2

George Walter Mitchell Maxwell

Chief Financial Officer

3

Gilles Jacobus Kriger

Executive Technical Director

4

Henry George Wilson

Non-Executive Chairman

5

Robert Alexander Lambert

Non-Executive Director

6

Louis Emmanuel Castro

Non-Executive Director

7

Russell Seth Harvey

Non-Executive Director

8

Andrew Bartlett

Non-Executive Director

9

James Ede-Golightly

Non-Executive Director

Senior Management

1

Pieter van der Groen

Technical General Manager

2

Jay Christison

Facilities General Manager

3

Micol Hetherington

General Manager Finance

The Board of Directors has formed the following committees in order to comply with the requirements of the UK Corporate Governance Code .

Board of Directors

Nomination Committee

Technical and Reserves Committee

Audit Committee

Remuneration Committee

Audit Committee

The Audit Committee consists of the following members of the Board

Louis Castro as a Chairman

Robert Lambert

Harry Wilson.

The Audit Committee meets twice in a year and has the responsibility for the proper monitoring of the financial performance of the company. The Audit Committee meets with external auditors once in a year and all the findings are duly reviewed for consideration and communicated to management for immediate compliance. The Audit Committee is also responsible to determine the remuneration of the external auditors.

Remuneration Committee

The Remuneration Committee consists of the following members of the Board

Harry Wilson as a Chairman

Louis Castro

Russell Harvey

The Remuneration Committee meets once a year to determine the remuneration of the executive members of the Board including incentive payments, bonuses and share options. The Remuneration Committee duly reviewed the performance targets and reports its recommendations to the Board.

Technical and Reserves Committee

The Technical and Reserves Committee consists of the following members of the Board

Robert Lambert

Louis Castro

Russell Harvey

The Technical Committee meets twice a year and is responsible for the technical affairs and performance of the company and is also responsible to appoint Technical Auditors and for the implementations of the recommendations proposed by such auditor.

Nomination Committee

The Nomination Committee consists of the following members of the Board

Harry Wilson

Robert Lambert

Russell Harvey

The Nomination Committee meets at least once in a year for the selection and re-appointment of directors by considering the structure, size, skills, knowledge and experience for recommendations.

Deloitte Touche Tohmatsu Limited (Private Company Limited by Guarantee)

Company Overview

'Deloitte' is a brand of big four accountancy firms operated through a team of dedicated professionals of its independent firms across the globe. Such firms are member firms of Deloitte Touche Tohmatsu Limited (DTLL), a United Kingdom based company limited by guarantee. Deloitte was founded by Mr. William Welch Deloitte in 1854 at the age of 25 and in 1893 he has also opened an office in the USA whereby he gains Procter and Gamble as its client. Later on, Mr. George Touche after qualifying as an Accountant from Edinburgh and Mr. Admiral Nobuzo Tohmatsu the member of Japanese firm was also added as a partner of the firm. Deloitte is globally connected to the network of member firms in more than 150 countries and it has more than 195,000 professionals, committed to becoming the standard of excellence

Core Operating Areas

The company and its member firms provide audit, consulting, financial advisory, risk management and taxation services to its diversified client portfolio across multi jurisdictions. Each member firm is structured differently according to its own national laws and regulations, customary practices and other factors.

Corporate Governance Structure

The company is governed by the senior partner and the executive group of partners as follows;

S#

Name

Designation

1

David Sproul

Senior Partner and Chief Executive

2

Richard Punt

Managing Partner - Growth and Markets

3

Vince Niblett

Managing Partner - Senior Markets Group

4

Steve Almond

Managing Partner - International Markets

5

Sharon Thorne

Managing Partner - Regional Markets

6

Nick Sandall

Managing Partner - Financial Services

7

Panos Kakoullis

Managing Partner - Audit

8

Andrew Hodge

Managing Partner - Tax

9

Paul Robinson

Managing Partner - Consulting

10

Timothy Mahapatra

Managing Partner - Corporate Finance

11

Heather Hancock

Managing Partner - Brand and Talent

12

David Barnes

Managing Partner - Public Policy

13

Steve Ward

Managing Partner - Quality and Risk

14

Stephen Griggs

Managing Partner - Finance

15

Richard Buck

Non-Managing Partner, Deloitte Digital

16

Sabri Challah

Non-Managing Partner, Partner Matters

17

David Gill

Non-Managing Partner, Internal Client Services

The hierarchy chain of the company is flat as follows;

Senior Partner=>Managing Partner=>Senior Manager=>Manager=>Deputy Manager=>Assistant Manager

Differences in Legal and Regulatory Environment between 'Eland Oil and Gas PLC.' and 'Deloitte Touche Tohmatsu Limited'

For the purpose of comparison between a public and private sector organization, Eland Oil and Gas PLC (public sector organization) and Deloitte Touche Tohmatsu (a private entity) have been chosen. Both the organizations are regulated under the Companies Act, 2006 of the United Kingdom. The differences in legal and regulatory requirements between the both organizations in terms of their public and private legal status are as follows;

S#

Eland Oil and Gas PLC.

Deloitte Touch Tohmatsu Limited

1

Can invite subscription from the public

Cannot invite subscription from the public

2

Does not have a restriction on transfer of shares

Have restriction on the transfer of its shares

3

Should have at least seven members

Should have at least two members

4

There is no restriction on the upper limit of the members of public companies.

However, in case of private company maximum members cannot exceed 50 members. The employee members are not counted for the purpose of deciding upper limit and joint shareholders are counted as one

5

A public listed company has to seek a certificate for commencement of business

A private company is not required to obtain certificate of commencement of business and it can commence business just after its incorporation

6

A public listed company has to raise minimum subscription before obtaining a certificate of commencement of business

There is no requirement to raise minimum subscription by a private company

7

A public listed company is required to file prospectus or statement in lieu of prospectus for obtaining certificate of commencement of business

There is no requirement of filing of the prospectus or statement in lieu of prospectus by a private company except when DTLL intends to convert into a public company.

8

A public listed company is required to file its accounts with the registrar

Filing of accounts is not required by a private company

9

The auditor of a public listed company is prescribed as a Chartered Accountant

No qualification is prescribed for an auditor of a private company

10

A public listed company cannot undertake investment in associated companies

However no restriction is imposed for investment in associated companies and undertakings in the case of a private company

11

Beneficial ownership of publicly listed companies is controlled and reported

No reporting of beneficial ownership is required

12

A public listed company is required to hold a statutory meeting once in its life

A private company is not required to hold a statutory meeting

13

Chief executive of a public company cannot engage in a competitive business

No restriction is imposed on the business of a chief executive in case of a private company.

14

A public company is required to file a statutory report

A private company is not required to file a statutory report

15

The quorum for a general meeting of a public company is two members present in person having not less than 25% voting power of their own account or through proxies. However, quorum in case of a listed company shall be ten members present in person having voting power as aforesaid

In contrast, a quorum for a general meeting of a private company is two members present in person having not less than 25% voting power of their own account or through proxies. However, quorum in case of a single member company is presence of the sole member personally or through proxy.

16

Minimum number of members should be three in the case of unlisted company and seven in the case of listed companies

Minimum number of members should be two in case of private company and one in case of a single member company.

17

Minimum number of directors should be true in the case of unlisted company and seven in the case of listed

Minimum number of directors should be two in case of a private company and one in case of a single member company.

Comparison of Corporate Governance Structure and Regulations

In the United Kingdom, there were initially three corporate reports - Cadbury, Greenbury and Hampel - recommend best practices in corporate governance, financial reporting and accountability. The Combined Code merges the recommendations of the three reports into best practice that should be followed by listed companies. The London Stock Exchange subsequently issued a combined corporate governance code, which was derived from recommendations of the Cadbury, Greenbury and Hampel reports as follows;

In case of Eland Oil and Gas PLC, the Board should meet regularly, and have a formal schedule of matters reserved to it for its decision. There should be a clear division of responsibilities between chairman and chief executive, preferably separation of the two roles. For FTSE 350 companies independent non-executive directors should make up at least half of the board. Deloitte Touche Tohmatsu Limited in contrast should have two non-executive directors. Directors should submit themselves for re-election at regular intervals (at least every three years).

Both should propose separate resolutions at the annual general meeting (AGM) on each substantially different issue. The chairman should ensure that members of the audit, remuneration and nomination committees are available at the AGM to answer questions. Notice of AGMs should be sent out at least 20 working days before the meeting. However, a private company may or may not convene such meeting.

The directors should explain their responsibility for preparing accounts. They should report that the business is a going concern, with supporting assumptions and qualifications as necessary. However, there is no such compulsion in the case of a private company.

In case of Eland Oil and Gas PLC, there should be a remuneration committee composed of independent non executive directors to set directors' pay, which should provide pay which attracts, retains and motivates quality directors but avoids paying more than is necessary. The company's annual report should contain a statement of remuneration policy and details of the remuneration of each director. However, there is no such mandatory requirement for Deloitte Touche Tohmatsu Limited (DTLL).

The directors of Eland Oil and Gas PLC should review the effectiveness of internal control systems, at least annually, and also review the need for an internal audit function.

The Board of Directors of Eland Oil and Gas PLC. Have established an audit committee whereas DTLL is not bound to establish an audit committee.

For a public listed company like Eland Oil and Gas, the auditors should include in their report a statement of their reporting responsibilities.

The accountability for and roles of managers in making business decisions are as follows;

In case of Eland Oil and Gas, the decision making is centralized since there is a tall hierarchy and hence the managers are not authorized to make business decisions. However, they can only suggest and recommend a suitable course of action that is in the interest of the organization as they are ultimately accountable to senior management and senior management in turn is answerable to the Board of Directors. The Board is accountable to shareholders about the company's financial performance. The Hierarchical structure of the company is as follows;

Managing Director (CEO)

Chief Executive

Divisional Executive Directors

Senior management

Departmental General Managers

Section Managers

Deputy Managers Middle management

Assistant Managers

Supervisors

Supervisory management

Team Leaders

Support Staff Workers

From the above tall hierarchical structure, we can see that there are three management cadres in Eland Oil and Gas PLC., that are, supervisory, middle and senior management. The supervisory management level is responsible to supervise and review the work of team leads and support staff and they are not authorized to make any decision as they are accountable to report to immediate middle line managers. The middle line managers include an assistant, deputy and section managers. They report to General Managers for the purpose of authenticating their decisions.

However, in contrast, we can see below Deloitte Touche Tohmatsu has short hierarchical structure as we can see above. The line managers are subject to take decisions within the boundaries of their authorities. The decision making is partially decentralized since there is a short span of control in case of flat hierarchy. The senior partner acts as an owner of the business who takes the share of profits earned during the period according to the partnership deed and is also responsible for most significant decisions for instance, in forming an opinion on the audit report of the company in case of senior audit partner. The flat structure is as follows;

Support Staff

Supervisors

Deputy Managers

Senior Departmental Manager

Senior Partner

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