Themajority of stakeholders look up to the company’s management, boardcommittees, and the board of directors for effective running of thecompany operations. This is because the responsibility of corporategovernance is given to these top executives, who are expected to usetheir leadership and managerial skills to serve the interests of therest of the stakeholders (Mayne, 2007). However, their effectivenessgoverning the corporation is often influenced by the effectiveness ofother members of staff, especially accountants. This paper willaddress the concept of corporate governance, role in corporategovernance relating to board committees, boards, and management andrelevant information that accountants should provide in order toguide the management and the board.
Corporategovernance refers to a system of practices, rules, and processes bywhich organizations are controlled and directed. Individuals andgroups of people that are expected to carry out the process ofcorporate governance should balance the interest of all stakeholders,who include suppliers, employees, customers, shareholders,financiers, and the government agencies (Mayne, 2007). Mostimportantly, the practice of corporate governance involves thedevelopment of a framework that guides the board of directors,management and board committees in attaining organization’sobjectives. This implies that corporate governance encompasses allspheres of management, including internal control, action plans,corporate disclosure, and performance management. The practice ofcorporate governance is based on numerous principles that are definedin legislations, such as Sarbanes-Oxley Act that was enacted in 2002.Some of the key principles that guide corporate governance includeequitable treatment of all stakeholders, transparency and disclosure,responsibilities and the role of the board, and integrity (Mayne,2007).
Roleof accountants in relation to boards, board committees, andmanagement
Accountantshave numerous roles in a company, but four of these roles have adirect relation to the management, board committees, and the boards.The first and the most basic role is the preparation of financialreports. Preparation of financial statements is a laborious exercisesince organizations are expected to have quarterly, half-yearly, andthe end of the year reports (Davis, 2014). Accountants prepare thesefinancial statements on behalf the executive management anddirectors.
Secondly,accountants play the role of managing financial data for the companyand on behalf of other stakeholders. Accountants are professionalswho have been rained on data collection and maintenance of financialrecords and presenting them in a manner that they are useful to themanagement and directors of the company According to Davis (2014)financial data needs to be kept in a pristine system since it servesas the key component that is used in managing and operatingbusinesses. This implies that the ability of the accountants tocollect and keep financial records determines the effectiveness ofthe company managers and directors in managing and operating theentire organization.
Third,accountants are better positioned to play the role of financialadvisory in a company than any other employee. The nature of accountswork helps them understand every detail ad trends in the companyfinancial positions more than the managers and directors (Davis,2014). For example, accountants discover a lot of the financialstrengths and weaknesses (such as irregularities and discrepancies)of the company as they conduct data analysis, which is one of theirday-to-day roles. Managers and directors rely on the advice providedby accountants to comprehend financial reports and make informeddecisions that serve the best interests of other stakeholders usingthe analysis performed by accountants.
Fourth,accountants monitor the company’s compliance with accountingstandards and other financial reporting requirements. It is a normaltrend for the stakeholders to blame the company’s directors andmanagers for any case of non-compliance and unethical practices(Davis, 2014). In reality, it is the primary duty of accountants todetect incidents of non-compliance and report them to directors andmanagers. The four major roles played by accountants in anorganization influence the efficiency of directors and managers inmaking decisions and guiding company operations. In addition, theroles of accountants determine the perception of the stakeholdersabout the ethical behaviors of directors and managers since theoutput of accounts’ job determine the quality of decisions made bythe top executive officers of the company and protect the wealth ofthe shareholders from misappropriation.
Informationthat accounts provide to support the management and the board
Inmost cases, accountants provide useful information to the managementand directors through the financial statements, such as balancesheet, cash flow statements, and income statements. Directors and themanagement use these statements to make different types of decisionsthat affect the financial and the overall performance of theorganization. For example, the statement of financial performancehelps the management understand whether the company is operating at aloss of at a profit, while the balance sheet help them determine thefinancial position of the organization (Shanker, 2014). In addition,the management and directors may require accountants to provide otherpieces of refined information (such as reports on ratio analysis)that can help them critical decisions faster.
Althoughcorporate governance is the primary responsibility of the managers,board, and board committees, their ability to govern theorganizations depends on the capacity of accounts to supply them withthe financial information. Managers and directors make decisions ondifferent matters, but nearly all of these decisions have a direct orindirect correlation with the company finances. Accountants fulfilltheir obligation of supplying directors and the management withinformation by preparing financial reports (such as balance sheets)and analytical reports that contain that has been simplified to makethe process of making decisions faster and easier.
Davis,S. (2014). Whatrole does an accountant play in business operations?Santa Monica: Demand Media.
Mayne,E. (2007). Corporategovernance principles and recommendations with 2010 amendments (2ndEd.).Sydney: ASX Council.
Shanker,S. (2014). Howcan managers use accounting information?Santa Monica: Demand Media.