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Maxwell Ethics Report
Maxwell Ethics Report
Content...............................................................................................................................1
Company Background........................................................................................................2
Issue 1 Reporting Standard - Overstated the Profit in 1970s.........................................3
The successful investigation carried out by Price Waterhouse showed the important of
unify accounting standards. The report was honored as an instrument in the accounting
profession deciding to confront the issue of uniform accounting standards. An
Accounting Standards Committee had been set up since then in order to unify the
accounting standards in financial reporting treatments and audits. However, in order to
keep the credibility of insisting accountants, government was invited by account
profession to impose some minimum standards for consistent financial reporting
treatments...........................................................................................................................3
Issue 2 Improper Use of Fund in 1990s.........................................................................4
The length of time one accountancy firm can audit the books of a particular company or
group of companies should be limited. In this case, Coopers had worked for Maxwell
since the early Seventies, by changing the firm in a regular time can avoid the impacts of
window dress..................................................................................................................4
Issue 3 Independent Non-Executive Directors ...............................................................5
Issue 4 Power and Authority...........................................................................................6
There should be a clearly accepted division of responsibilities at the head of company,
which would ensure a balance of power and authority. If the chairman is also the chief
executive, like Maxwell, it is essential that there should be a strong and independent
element on the board, with a recognized senior member...................................................6
Who is to Blame for?.........................................................................................................7
Main Recommendations.....................................................................................................8
Company Background
Robert Maxwell was a British media proprietor and famous in the media industries from
the 1960s till now. The following timeline illustrates how he had expanded his business
empire since his young.
May
July
June
July
Feb.
1951
1964
1969
1969
1971
1974
1981
1984
1987
March
1988
1991
May
Nov.
Dec.
March
2001
Solutions
Independent Non-Executive Directors (INED) should include in the board with
sufficient caliber and number for their views to carry significant weight. Also, they should
bring an independent judgment to bear on issues of strategy, performance, resources, and
standards of conduct.
Besides, the majority of INED should be independent of management and free from any
business or other relationship which could materially interfere with the exercise of their
judgment.
Main Recommendations
Lack of internal controls was a huge problem on Maxwells case. Had auditors and
regulators insisted on changes, the magnitude of the fraud would have been less devastating.
Department of Trade and Industry suggests that although many of the deficiencies in
legislation and regulation which permitted the events at Mirror Group Newspapers to occur
have been rectified, there remain some important matters which still require being addressed
or considered including:
1. Providing more assistance to and encouraging training for trustees who perform the vital
role of the stewardship and investment of Pension Schemes.
2. Providing a statement of Guidance on the role and duties of advisers on a flotation.
3. Building on the radical changes in particular by imposition of severe sanctions against
companies who do not report fraud.
4. Addressing the regulation of markets in securities to provide more effective control over
firms that operate on a transnational basis to ensure the fair, open and transparent conduct of
such markets and more effective investor protection.
5. Providing more detailed guidance on the audit of business "empires".
6. Addressing the issues relating to auditor independence with a view to maintaining public
confidence in the audit and discouraging a firm which provides audit services to a company
from acting as reporting accountants on that company.
7. Making non-executive directors more accountable, separating the offices of chairman and
chief executive, and providing extra statutory Guidance on the duties of all directors to
amplify the general principles that it is proposed be incorporated into the Companies Act.
8. Avoiding an "expectations gap" by making the public aware that regulation cannot entirely
eliminate fraud, malpractice or manipulation of the markets.
The above table shows the code of corporate governance and key code
recommendations in relation to four core areas identified by EIRIS (Ethical Investment
Research Services).
As we can see from the graph, after all these years, UKs corporate governance is now
well-developed and even superior among the developed countries. A detailed analysis of
several UK corporate governance reports also revealed that the UK has been able to influence
US corporate governance regulation. To conclude, corporate governance is one of the critical
issues in business today. For companies, good governance means securing access to broaderbased, cheaper capital. For investors, a commitment to good governance means enhanced
shareholder value. For both, good governance equals good business.
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Bibliography Information
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