Accounting Business Reporting for Decision Making

CHAPTER 2 Accounting in society 65

is therefore not surprising that independent verification is an important element of principle 4 of the ASX

guidelines, which relates specifically to safeguarding the integrity of corporate reporting.

Under principle 4 of the ASX guidelines for good corporate governance, it is recommended that:

• the board should establish an audit committee


• the audit committee should consist of:
  
  
  • only non-executive directors
  
  
  • a majority of independent directors
  
  
  • an independent chairperson, who is not chairperson of the board
  
  
  • at least three members
  
  
  
  


• the entity should disclose the audit committee charter, details of those on the audit committee

including their experience and qualifications, and the number of meetings and attendees of the audit

committee, and explanations of any departures from the recommendations as stated above should be

included in the corporate governance section of the annual report. It is also recommended that the pro-

cedures for selection and appointment of external auditors are made publicly available.

The use of audit committees and an independent external auditor to help promote the integrity of the

financial system is key to providing the public with confidence. You are encouraged to obtain an annual

report of a listed public company and investigate the information provided in the report to satisfy prin-

ciple 4 of the ASX guidelines.

VALUE TO BUSINESS

•   Corporate governance refers to the direction, control and management of an entity. The board of

directors is given the authority through an entity’s constitution and/or the Corporations Act to act on

behalf of shareholders.

•   A number of corporate governance guidelines help to foster improved governance practices. The

ASX guidelines are applicable to listed public entities. Principle 4 of the guidelines addresses the

need to safeguard the integrity of corporate reports, and is specifically relevant to accountants and

the information they provide to decision makers.

•   There is a growing awareness that the board of directors needs to consider a range of different

stakeholders when making decisions. Accountants can help entities meet their social and

environmental responsibilities and assist with their corporate social responsibility reporting.

2.5 Ethics in business

LEARNING OBJECTIVE 2.5 Outline the role of ethics in business and compare ethical philosophies
relevant to business decision making.

Related to the concept of governance and sustainability is ethics. In fact, the key to governance for sus-

tainability may be determined by the extent of ethical consciousness. The business world has control of

the world’s resources, and makes decisions every day that affect those resources and the lives of millions

of people, so it is imperative that those who operate within the business world have an understanding of

various ethical philosophies to help guide their decision making.

Ethical philosophies have been central to the study of humankind for centuries. ‘What ought one to do?’

was asked by Socrates and argued by Plato as the fundamental question of ethics. Fundamental principles of

ethics such as virtues, duty, morals, prudence and justice have been proposed and debated throughout history.

Ethical philosophies

Two common approaches to the study of ethics are the teleological approach (sometimes called con-

sequentialism) and the deontological approach (sometimes called idealistic). Teleological theories are

concerned with the consequences of decisions, whereas deontological theories are concerned with the