FINANCE REPORT

The Impact of Corporate Governance Mechanisms on the Quality of Financial Reporting

Table of Content

Introduction1

Discussion2

Corporate Governance and Financial Disclosure in the Light of FRC, Cadbury, and Greenbury Reports2

Corporate Governance Code of UK by Financial Reporting Council (FRC)2

Corporate Governance and Financial Disclosure by Greenbury Report3

Corporate Governance and Financial Disclosure by Cadbury Report4

Corporate Governance and Financial Disclosure Quality and Extent6

Corporate Governance and Voluntary Financial Disclosure9

Ownership Structure9

Board Independence10

CEO Duality11

Corporate Governance and Board of Director's Responsibility for Strategic Financial Disclosure12

Corporate Governance Rating and Financial Disclosure Quality16

Corporate Governance and Restatement of Financial Reporting18

Conclusion18

References21

Appendix26

Paper Outline

This paper discusses the impact of corporate governance mechanisms on financial reporting quality. In order to study this relation, first this paper highlights reports that consist of corporate governance codes and recommendations for it by higher authorities. These reports include FRC report, Greenbury report, and Cadbury report; which provides comprehensive view of corporate governance aspects that can impact the quality of financial disclosure. Further, other articles are then studied to fully explain this relationship with every aspect. The head corporate governance and financial disclosure extent and quality discuss the effect of corporate governance practices on the extent and quality of financial disclosure. Similarly, other heads also illustrates the study of corporate governance and financial reporting aspect like effect of corporate governance rating on financial disclosure, or board of director's responsibility for strategic governance, corporate governance mechanisms impact on voluntary disclosure, and financial restatements and corporate governance. Thus, several aspect of this study are highlighted in this paper for clearly demonstrating the relationship between corporate governance mechanisms and financial reporting quality. The Impact of Corporate Governance Mechanisms on the Quality of Financial Reporting

Introduction

The topic that I have chosen for this report is “The impact of corporate governance mechanisms on the quality of financial reporting”. This study holds an immense importance in the field of finance because financial reporting is one of the most crucial aspects for any company as it highlights the financial position of companies upon which depends their success. In order to rightly report the financial position of a company, good corporate governance is essential. As the link between company's financial reporting system and its directors is really crucial, where, one of the most significant function of the corporate governance is ensuring the process of financial reporting. However, the accounting scandal proliferations have prompted the requirement of improving the relevance of financial reporting by developing enhanced governance structures. According to Nesrine Klai and Abdelwahed Omri, in perspective of developed countries the relation between information quality and corporate governance is strongly debated, and only recently the attention has diverted towards evaluating and studying the governance and financial disclosure in emerging countries (2011, p.158). Thus, the attention is now diverted towards evaluating this relation and studying its effectiveness.

This report examines that impact of corporate governance mechanisms on financial reporting for which it is really essential to take in the information from various credible sources, so that an effective analysis can be followed. This study incorporates information from variety of credible sources including journal ...