Audit, Corporate Governance and Ethics

Part A: Individual Assignment (3000 words)

Topic: Restoring Trust in Audit, Corporate Governance and Ethics

Background:

Corporate failure, as stated by the Institute of Chartered Accountants in England and Wales (ICAEW, 2021) is caused by the action, or inaction, of company directors, not auditors. Invariably this is not deliberate sabotage, but directors, usually executive directors given their role in actively managing the company, failing to respond adequately to the needs of customers or taking excessive financial risk, both factors that should be properly controlled against and visible in corporate reporting when they occur. Failure is also caused or exacerbated by fraud (ICAEW, 2021).

Following a series of large corporate failures (e.g., BHS in 2016, Carillion in 2018, British Steel in 2019, Thomas Cook in 2019 and Wirecard in 2020), which led to job losses and uncertainty among businesses and local communities over the last few years, the Government set out plans to further strengthen the UK’s audit and corporate governance framework and empower shareholders.

The plans as set out by the Government were based on the recommendations of three independent reviews: Sir John Kingman’s Independent review of the Financial Reporting Council (FRC) (2018), the Competition and Market Authority’s statutory audit market study (2019), and Sir Donald Brydon’s independent review of the quality and effectiveness of audit (2019). Furthermore, in March 2021, the Department for Business, Energy and Industrial Strategy’s (BEIS) issued a White Paper titled ‘Restoring trust in audit and corporate governance’. This document sets out proposals on strengthening the UK’s corporate governance framework and the way companies are audited. The document further states that the Government recognises that ‘corporate failure can happen, but it should rarely be a surprise’ (Department for Business, Energy and Industrial Strategy, 2021). Hence, fair, balanced and reliable corporate reporting helps highlight risk and acts as an early warning system.

Moreover, Audit has a vital role to play. Auditors cannot prevent corporate failure but must help ensure financial statements can be trusted. In sum, a strong core audit is key. Thus overall, it is right to prioritise steps designed to ensure executive director accountability for robust controls, and help to guard against fraud (Department for Business, Energy and Industrial Strategy, 2021; ICAEW, 2021).

Instructions:

The UK government has published a roadmap for a package of reforms to improve audit, corporate reporting and corporate governance systems. Hence following this:

• You are required to critically evaluate relevant academic literature and discuss how trust can be restored in audit and corporate governance systems. You must also consider the role of professional ethics in restoring trust to a public limited company’s stakeholders.

Guidance Notes:

 Your answer should display a good understanding of corporate governance, audit AND ethics in relation to the issues highlighted from recent corporate failures and scandals.

 Your essay must demonstrate a good awareness of appropriate academic literature and theories by including a critical evaluation of and an extensive literature review of the issues discussed.

 Your essay must include literature on corporate governance, audit AND ethics on topics such as:
o The role of corporate governance codes and the effectiveness of the comply or explain approach.
o Accountability and transparency
o Board committees
o Board diversity and board effectiveness
o Auditor independence
o Proposals for change in the Brydon and Kingman reports and current government proposals, for example joint audits / managed shared audit, new audit profession, separation of audit and consulting
o The audit expectation gap
o The extended audit report
o Evaluating and Making Decisions in Business Ethics
o Models of ethical decision making and the role of individual and situational influences

 Your essay should delve into the literature on corporate governance, audit, and ethics, offering a comprehensive discussion of the identified topics. Given the restricted word limit, you should not try to cover all the topics highlighted above; instead, prioritise providing a thorough exploration of the topics you choose to discuss. Your essay must ensure you cover at least one topic on each of the module’s core areas (corporate governance, audit and ethics).
Your essay should also include:

• An appropriate title
• An abstract (maximum 300 words) and a set of related keywords.
• An introduction outlining the importance of the topic as a contemporary issue affecting both theory and practice.
• A coherent and sectionalized structure covering different aspects related to audit, corporate governance and ethics and any associated sub-themes.
• A summary/conclusion section including linkages between business practice and academic theory.
• A reference list using the APA referencing convention.

References:

Brydon, D. (2019). Report of The Independent Review Into The Quality and Effectiveness Of Audit. Retrieved from https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1079594/restoring-trust-in-audit-and-corporate-governance-govt-response.pdf
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/852960/brydon-review-final-report.pdf
CMA. (2019). Statutory Audit Services Market Study. Retrieved from https://assets.publishing.service.gov.uk/media/5d03667d40f0b609ad3158c3/audit_final_report_02.pdf

Department for Business, Energy and Industrial Strategy. (2021). Restoring Trust in Audit and Corporate Governance. Retrieved from https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1079594/restoring-trust-in-audit-and-corporate-governance-govt-response.pdf

ICAEW. (2021). Restoring Trust in Audit and Corporate Governance. Retrieved from https://www.icaew.com/-/media/corporate/files/technical/icaew-representations/2021/icaew-rep-6321-restoring-trust-in-audit-and-corporate-governance.ashx

Kingman, J. (2018). Independent Review of the Financial Reporting Council. Retrieved from https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/767387/frc-independent-review-final-report.pdf
 

Part B Group Presentation (20 mins for the Presentation and 10 minutes for questions and answers)

Instructions on Assessment:

This work should be completed in groups of 4 to 5 members and is weighted to 40% of your marks on this module. Students with approved special circumstances can work individually (please contact your Module Tutor).

You should create a group and send the names of your group members to the module tutor via an online form

Group Presentation

Your group must conduct relevant research to identify one issue that your group believes holds the utmost significance in restoring trust in corporate governance, audit, and ethics, in the aftermath of the notable corporate failures in the UK. The presentation must include the following:

• A clear introduction highlighting why ‘trust’ needs to be restored in corporate governance, audit and ethics.
• Explain the relevance and significance of your chosen issue.
• A clear rationale and justification of the issue identified using academic literature, theories, practitioner publications and real-world examples.
• Highlight any regulatory or policy implications associated with the issue identified.
• A conclusion that provides practical recommendations for addressing the identified issue and outlines a direction for the future.

Guidance Notes:

• You must identify one contemporary issue that affects auditing, corporate governance or ethics. In order to help you identify the issue, your group can draw upon the media, recent scandals or government reforms. The issue selected must enable you to demonstrate your understanding and application of topics discussed in this module.
• You are expected to use academic literature to critically evaluate relevant frameworks, ideas and theories that can be applied in addressing and solving the issue you have chosen.
• You must discuss and present recommendations or solutions that can be applied to practice or policy in order to resolve the issue identified.
• Each member of the group who worked on the group assessment will receive the same mark for this element of the assignment.
• You are encouraged to develop your technology skills using various software in creating this presentation.

Late submission of work

Where coursework is submitted without approval, after the published hand-in deadline, the following penalties will apply.

For coursework submitted up to 1 working day (24 hours) after the published hand-in deadline without approval, 10% of the total marks available for the assessment (i.e.100%) shall be deducted from the assessment mark.

For clarity: a late piece of work that would have scored 65%, 55% or 45% had it been handed in on time will be awarded 55%, 45% or 35% respectively as 10% of the total available marks will have been deducted.

Coursework submitted more than 1 working day (24 hours) after the published hand-in deadline without approval will be regarded as not having been completed. A mark of zero will be awarded for the assessment and the module will be failed, irrespective of the overall module mark.

For clarity: if the original hand-in time on working day A is 12noon the 24 hour late submission allowance will end at 12noon on working day B.

Word limits and penalties

If the assignment is within +10% of the stated word limit no penalty will apply.

The word count is to be declared on the front page of your assignment and the assignment cover sheet. The word count does not include:

• Title and Contents page • Reference list • Appendices • Appropriate tables, figures and illustrations
• Glossary • Bibliography • Quotes from interviews and focus groups.

Please note, in text citations [e.g. (Smith, 2011)] and direct secondary quotations [e.g. “dib-dab nonsense analysis” (Smith, 2011 p.123)] are INCLUDED in the word count.

If this word count is falsified, students are reminded that under ARTA this will be regarded as academic misconduct.

If the word limit of the full assignment exceeds the +10% limit, 10% of the mark provisionally awarded to the assignment will be deducted. For example: if the assignment is worth 70 marks but is above the word limit by more than 10%, a penalty of 7 marks will be imposed, giving a final mark of 63.

Students must retain an electronic copy of this assignment (including ALL appendices) and it must be made available within 24hours of them requesting it be submitted.

Note: For those assessments or partial assessments based on calculation, multiple choice etc., marks will be gained on an accumulative basis. In these cases, marks allocated to each section will be made clear.

Academic Misconduct

The Assessment Regulations for Taught Awards (ARTA) contain the Regulations and procedures applying to cheating, plagiarism and other forms of academic misconduct.

The full policy is available at:

You are reminded that plagiarism, collusion and other forms of academic misconduct as referred to in the Academic Misconduct procedure of the assessment regulations are taken very seriously by Newcastle Business School. Assignments in which evidence of plagiarism or other forms of academic misconduct is found may receive a mark of zero.

Module Learning Outcomes (MLOs)

What will I be expected to achieve?

Knowledge & Understanding:
• MLO1: Knowledgeable about theories, philosophies, and practices used in the areas of audit, ethics, and corporate governance.

Intellectual / Professional skills & abilities:
• MLO2: Skilful in the use of professional and managerial techniques and processes

Personal Values Attributes (Global / Cultural awareness, Ethics, Curiosity) (PVA):
• MLO3: Aware of ethical issues impacting on business and professional practice Programme (Level) Learning Outcomes that this module contributes to:

Knowledge & Understanding:
• 4.1: Acquire, interpret and apply knowledge of accounting and finance

Intellectual / Professional skills & abilities:
• 3.2: Demonstrate decision making, problem-solving and project management skills.

Personal Values Attributes (Global / Cultural awareness, Ethics, Curiosity) (PVA):
• 1.2: Demonstrate the development of inter-personal and intra-personal skills.
• 2.1: Demonstrate their ability to work in culturally diverse groups and teams and make an appropriate and personal contribution to team effectiveness.
• 2.3: Understand the wider impact of individual or organizational decision making on social and environmental contexts