Vocation Accounting and Corporate

Question: Discuss about the Vocation Accounting and Corporate. Answer: Introduction The main purpose of this paper is to apply the concepts of accounting and corporate governance practices in a real life situation. The company that will be analyzed for the application of these concepts include Vocation Ltd, which is an education and training providers in Australia. In the year 2015, the company was failure and this paper critically analyzes Vocation Ltd's failure. The paper also outlines how could an effective implementation of the third edition of 'ASX Corporate Governance Principles' have positively prevented the failure. Background: Analysis of Vocation's Failure It is examined that the difficulty of Vocation started in the year 2014 when its Aspin and Bawm colleges were found for having only essential or minimum features of their federal registrations. In addition, in relation to the quality of the training courses provided by the colleges, Victorian government funding also received complaints (Rose, 2015). Moreover, as Vocation Ltd. is listed on Australian Securities Exchange, it is also subject to three different kinds of actions as a consequence of the decrease in its share price from $3.35to 12 (Danckert and Preiss, 2015). It is also evaluated that the shareholders also report that the company did not disclose its regulatory issues in an adequate manner. In addition, the administrators appointed for the preliminary review of the company's failure, suggested some other causes behind the company's failure. They found poor operational functions and processes is one of the major reasons as due to the ineffectiveness of the operations, some of the government clients review the adequacy of courses that are delivered by the institute (Ferrier Hodgson, 2015). Furthermore, as a result of these reviews (ending operations of BAWM and Aspin) , the company needs to repaid significant funding provided by these government authorities (Danckert and Preiss, 2015). At the same time, it is also found that as a consequence of the negative publicity surrounding the critical reviews, the company also lost various important institutional customers resulting in the company failure (Ferrier Hodgson, 2015). It shows the company was unable to ensure the availability of effective internal control system that lead to inadequate operational procedures, government reviews, and negative publicity of the institute. Moreover, it is also assessed that the company was also facing some issues related to the continuous disclosure of the Group's obligations that result into the starting of different class action lawsuits as well as the failure of the company (Ferrier Hodgson, 2015). All these also cause to the Group's inability to continue to bring up equity enough to maintain liquidity. In addition, it also affects the financial performance of the company as it creates the need to sell parts of the business to reduce external liabilities or debt. Concurrently, in regard to the above issues, it is assessed that the application of positive accounting theory is also supportive to shape the firms' internal accounting practice. At the same time, in relation to the success of this theory in current highly changing business environment, the normative theory positively supported the previous accounting theory (Griff, 2014). It is found that companies should employ normative theory to show compliance with the accounting standards and practice. Actions and their Analysis Based on the above analysis, it is examined that Vocation Ltd. did not develop an efficient corporate governance practice that result into the failure of the company (Rankin, et. al, 2012). It is because corporate governance provides a system which is beneficial to direct and manage the companies successfully (Nuryanah and Islam, 2015). It impacts on different processes of the company through which the main business goals and objectives are determined and attained, risk is supervised and evaluated, and performance is optimized. Concurrently, it is also evaluated that a good corporate governance structure promotes businesses to generate value through innovation, development, etc. and provide accountability and control systems equals with the involved risks (ASX Corporate Governance Council, 2003). Thus, it shows that by making a good corporate governance structure for the company such failures can be reduced. Accounting theories also support the establishment of good governance system to secure investors' interest and make sure about the firm's long-term business survival (Deegan, 2014). It is because these theories provide policies that discipline managers to attain the benefits of implementing good corporate governance practices (Nuryanah and Islam, 2015). Additionally, these theories also indicate the interrelationships among risk management, accounting practices and corporate governance. One of the reasons, which indicate that why the use of an effective corporate governance system can be beneficial to prevent the company failure is that it is helpful to assert and encourage the confidence and trust level of investors both in national and international markets (Plessis, McConvill, and Bagaric, 2005). In addition, such systems also ensure that the company effectively meets with its disclosure obligations, which are also essential to make sure about the company's long-term business survival (Rankin, et. al, 2012). ASX Corporate Governance council is in the charge to conduct a regular review of the principles to make sure that they are relevant as per the changes in local and overseas markets and also reflects international best practices (ASX Corporate Governance Council, 2003). There are ten principles given by ASX corporate governance, which are effective to underlie a good corporate governance for the company that might be beneficial to prevent the company's failure (Plessis, et al, 2012). For example, one of the principles is ' to promote ethical and responsible decision making in an active manner'. In order to effectively apply this principle, the company can establish a code of conduct to direct the behavior of key executives including the directors, and the chief executive and financial officers (Plessis, McConvill, and Bagaric, 2005). It would be beneficial to present the company's commitment to ethical practices resulting in enhancing the investors' confidence and preventing the failure of the organization. At the same time, with the application of this principle, the company should also disclose the policy related to trading in the company securities by the employees, officers and directors (Rankin, et. al, 2012). In last, the firm should also prov ide information about the reporting on this principle. In addition, there are also other principles including acknowledge and publish the board and management's respective roles and responsibilities, structure a board to discharge the responsibilities, safeguard integrity in financial reporting, encourage timely and balanced disclosure, respect the stockholders' right, identification and management of risk, promotion of increased performance, provide fair and responsible remuneration, and identification of the legitimate interests of stakeholders (ASX Corporate Governance Council, 2003). The application of all these principles in an adequate manner would be beneficial to make sure about the long-term success of the company. For instance, to apply the fourth principle, the company's CEO and CFOs should state in writing to the board of directors that all the financial reports of the company demonstrate a true and fair view in relation to all material concerns (Tarantino, 2012). At the same time, they should also clearly state that the firm's operational results and financial condition are as per the applicable accounting standards and norms. It might be helpful to prevent the company's failure as all the financial statements present a true monetary picture and there are lack of chances for fraud by the management or some other people (Plessis, McConvill, and Bagaric, 2005). The agency theory proposes that a company's management is attempted on behalf of that organization's owners or shareholders. In simple word, the shareholder theory states that the role of the management of the company is to act as the shareholder's (principles) agents (Crowther and Jatana). As per this theory, potential conflicts like disagreeing for the goal between managers and shareholders can create agency problem and consequently failure of the company. Rouco (2015) argued that the implementation of theories of leadership can be beneficial to ensure the application of sustainable moral actions and ethical conduct, which successively could reduce corporate failure. This theory also stresses on the importance of corporate governance for overcoming agency problems and prevent business failures (Rouco, 2015). In addition, the ASX principle, which states that the company should structure an audit committee that consists of only non-executive directors, most of independent directors, an independent chairperson, and minimum three member may also be supportive to prevent the company's failure (ASX Corporate Governance Council, 2003). It is because such audit committee makes sure about the all material disclosure and presence of a good corporate governance system. In contrast, as from the case of Vocation Ltd, it is assessed that the company failure was mainly due to the non-disclosure of all material information, the application of 5th principle as timely and balanced disclosure can also be significant to prevent such corporate failure (Rankin et. al, 2012). For the reason, with the application of this principle the company ensures that all the investors have timely and equal access to material information about the business including current performance, liquidity and financial position, governance and the ownership (Plessis, et al, 2012). At the same time, it is also evaluated from the best practice recommendations that companies should design written processes and policies to make sure about the compliance with this principle by ensuring accountability with senior management level. It would be helpful to disclose all the necessary information to the investors and other third party providers resulting in overcoming the issue of corporate fa ilure (Henderson, Peirson, Herbohn, and Howieson, 2015). Thus, it can be stated that building of a good corporate governance structure can be beneficial to overcome the issues related to big corporations failure. It is because it requires management to act in order to benefit the shareholders as well as to comply with the external system and regulations. The Sarbanes-Oxley Act also justifies that building of a sound corporate governance system can be helpful to prevent big corporate scandals and failures such as Enron, and World Com (Wolk, Dodd and Rozycki, 2016). This act came into force after large business scandals due to the increased public pressure. This act is passed as "the Public Company Accounting Reform and Investor Protection Act of 2002" which emphasizes on independence, auditing, quality control, ethics and other standards to protect investors as well as prevent big business scandals (Deegan, 2014). Conclusion In order to summarize the above discussion, it can be concluded that Vocation ltd. was mainly fail in the year 2015 due to non-disclosure of all material information, lack of compliance with all rules and regulations as well as the implementation of poor operational functions. It can also be summarized that by effectively applying ASX corporate governance principles, the company can likely prevent the failure. It is because all these principles emphasize to design an audit committee that includes the independent directors, timely disclosure requirements, adequate financial reporting, fair compensation, risk identification and management, etc., which are beneficial to prevent the failure of the company (Plessis, et al, 2012). Concurrently, it can also be summarized that different accounting theories such as stakeholder theory, regulations, etc. also define the importance of building an effective governance system in order to ensure adequate compliance and conduct business in an ethica l manner. References ASX Corporate Governance Council (2003). Retrieved from https://www.ecgi.org/codes/documents/asx_recommendations.pdf Crowther, D., and Jatana, R. (n.d). Agency Theory: A Cause of Failure in Corporate Governance. Retrieved from https://www.guberna.be/sites/default/files/newsflash/nl_Readers/Agency%20Theory%20-%20A%20Cause%20of%20Failure%20in%20Corporate%20Governance.pdf Danckert, S. and Preiss, B. (2015). Up to 12,000 students in limbo after Vocation collapse. The Sydney Morning Herald. Retrieved from https://www.smh.com.au/business/banking-and-finance/up-to-12000-students-in-limbo-after-vocation-collapse-20151126-gl8xfw.html Deegan, C. (2014). Financial Accounting Theory. Australia: McGraw-Hill Education Australia. Ferrier Hodgson (2015). Vocation Limited and its associated entities: (Administrators Appointed). Retrieved from https://www.ferrierhodgson.com/au/-/media/ferrier/files/documents/corp-recovery-matters/vocation-limited/section-439a-report-to-creditors/vocation-limited-s439a-report-to-creditors.pdf Griff, M. (2014). Professional Accounting Essays and Assignments. Lulu Press, Inc. Henderson, S., Peirson, G., Herbohn, K., and Howieson, B. (2015). Issues in Financial Accounting. Australia: Pearson Higher Education AU. Nuryanah, S. and Islam, S. (2015). Corporate Governance and Financial Management: Computational Optimisation Modelling and Accounting Perspectives. Germany: Springer. Plessis, J. D., Grofeld, B., Luttermann, C., Saenger, I., Sandrock, O., and Casper, M. (2012). German Corporate Governance in International and European Context. Germany: Springer Science Business Media. Plessis, J. D., McConvill, J. and Bagaric, M. (2005). Principles of Contemporary Corporate Governance. UK: Cambridge University Press. Rankin, M., Stanton, P., McGowan, S., Ferlauto, K. and Tilling. M. (2012). Contemporary Issues in Accounting. USA: Wiley. Rose, S. (2015). Vocation collapses, 150 people lose jobs, 10,000 students in limbo. Retrieved from https://www.smh.com.au/business/vocation-collapses-150-job-losses-20151130-glbszd.html Rouco, J. C. D. (2015). ECMLG2015-11th European Conference on Management Leadership and Governance: ECMLG2015. USA: Academic Conferences and publishing limited, Tarantino, A. (2012). Manager's Guide to Compliance: Sarbanes-Oxley, COSO, ERM, COBIT, IFRS, BASEL II, OMB's A-123, ASX 10, OECD Principles, Turnbull Guidance, Best Practices and Case Studies. USA: John Wiley Sons. Wolk, H. I., Dodd, J. L. and Rozycki, J. J. (2016). Accounting Theory: Conceptual Issues in a Political and Economic Environment. USA: SAGE Publications.