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  • June 14, 2024
  • Last Update May 7, 2023 10:40 am
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Corporate governance reports

This is a very fashionable subject and within the UK three reports are issued since 1992. These are:

The report of the Committee on the financial aspects of Corporate

Governance; the code of best practice (the Cadbury Code). This was published in December 1992.

Directors’ remuneration – the Greenbury Committee Report which was issued in July 1995.

The Committee on Corporate Governance – the ultimate report of the Hampel Committee which came go into January 1998.

In July 1998, the Committee on Corporate Governance issued the ‘combined code’. This new code consolidates the work of the three earlier committees. Listed companies now should report on how they need applied the principles within the combined code. this implies that the subsequent matters have to be presented:

details of the administrators and their remuneration;

relations with shareholders;

accountability and audit matters which cover financial reporting,

internal control, the Audit Committee and relationships with the external auditors.

The role of auditors

External auditors, like PricewaterhouseCoopers, express an independent, professional opinion about the ‘truth and fairness’ of the financial statements. They express this opinion to shareholders who are liable for appointing them. it’s the responsibility of the administrators to organize these statements in keeping with the wants both of the businesses Acts and also the relevant accounting standards. The auditors don’t certify the financial statements as being right or wrong.

Here is an extract from the audit report of Marks & Spencer for the year ended 31 March 1998:

In our opinion, the financial statements provides a true and fair view of the state of affairs of the group at 31 March 1998 . . . they need been properly prepared in accordance with the businesses Act 1985.

Generally Accepted Accounting Principles (GAAP)

In the UK, the mandatory elements of GAAP are the 1985 Companies Act, Accounting Standards, abstracts issued by the principle Board’s Urgent Issues Task Force and, for listed companies, the Stock Exchange’s Listing Rules. There are aspects of UK GAAP that relate to specific sectors like the accounting requirements contained in legislation for banks and charities. There also are statements of recommended practice that aren’t mandatory. they’re issued by organizations like the industry Accounting Committee and also the Association of British Insurers.

What is the sensible effect of of these developments? The cynics would say ‘A large indefinite amount of paper’! for instance, the newest (1998) Marks & Spencer Annual Report contains:

Chairman’s Statement;

Financial Review;

Corporate Governance Report;

the Audit Report;

the Directors’ Report.

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