CONTEMPORARY ISSUES IN ACCOUNTING

Contemporary issues in Accounting



Contemporary issues in Accounting

Part A The information asymmetry between the insiders (e.g. managers) and the outsiders of a firm (e.g. shareholders) is the main cause of corporate failures. More regulations should be implemented to enforce firms to become more transparent in their financial and non-financial disclosure. Discuss.

Introduction

The great crisis and bankruptcy that began to emerge in the different systems and corporations in the recent past has aroused the need to transform the practices of corporate business, thus creating government that comes to the corporate world to try to normalize the functioning of markets, especially the markets for capital. This is since this market is where are the biggest frauds of the economy, for lack of information transparent financial, reliable and high quality (Ayres 1992, p.90).

Corporate governance simply means business management; the term is usually normatively used in the sense defined here. There are a number of rules (guidelines, principles, codes) that define good corporate governance, with the target directions differ. On one hand, it comes to responsible corporate governance in the interests of owners and shareholders as well as the public. Another perspective concerns the stakeholders and other stakeholders (especially employees, including the evidence that long-term success is attainable only with the involvement of these interests, whether the most comprehensive perspective also calls for social, cultural and social responsibility. (Rappaport 1986, p.45)

Asymmetric information between the different partners of a company (shareholders, creditors, managers). They have inside information on the status and prospects of the company which may lead them to prioritize their funding methods to preserve their independence, preferring to resort first to the self-financing, then debt and last equity. There is also an asymmetry in status between the shareholder and creditor of a company as the shareholder may lose all of his contributions in return for potentially unlimited profits while the creditor is limited to the amount of interest accruing after the loan money.

Thus, it corresponds to the understanding of corporate responsibility, as well as the Comprehensive Quality Management. Corporate governance is the set of principles and techniques to improve the management of commercial companies that appeal to the public's savings. It arises from the need to overcome the problems of separation between ownership and management in large publically traded companies (Yoshimori 1995, p.33-44).

In recent times, corporate governance has attracted huge consideration as a direct outcome of a numerous high-profile governance collapses at the start of the new millennium. A variety of parties comprising of the shareholders, regulators and press are stressing the need for enhanced governance for all companies. For instance, shareholder activists in terms of board monitoring insist on a higher proportion of independent directors on all the important board committees including board of directors and also more hands-on participation of the board in the day to day operations of the firm. In the same course, many regulations were passed including (e.g., amendments to NASDAQ and NYSE regulations and more importantly the Sarbanes-Oxley Act) were approved to make a number of the proposals ...