ASX Governance Principles Compliance By Telstra

Board and Management Responsibilities

Discuss about the Corporate Governance of Telstra.

The explanation of the ASX governance principles and its compliance by the Telstra can be described as follows:

Telstra, in accordance with the ASX Corporate governance principle, has identified and stated the respective roles and responsibilities of Board and management and the respective process for evaluation of their performance. The corporate governance statement has provided the roles and responsibilities of Board and management. The main role of Board is to examine and overall business of the company and develop its strategic aims and objectives. The key responsibilities of Board are to develop and implement the corporate strategies and review its effectiveness (Mallin, 2016). The various responsibilities of Board are discussed separately in the governance framework of the company. The process adopted by Board for reviewing its performance on its annual basis is discussed in the governance framework. The process of reviewing the performance of management is carried out by the remuneration committee developed by Board (2017 Corporate Governance Statement, 2017).

The Board of company in accordance to the ASX principle needs to develop an adequate structure having proper mix of diversity, skills and experience to carry out its responsibilities properly. Also, the Board is composed on non-executive directors and the CEO and their qualification are presented in the director’s report as provided by its governance statement. The stakeholders can also analyze the board effectiveness for meeting its various roles and responsibilities in the Board skills matrix 2017 Corporate Governance Statement, 2017).

Telstra has developed sound values, code of conduct and policy framework that provides the standards need to be maintained by all the employees and directors for meeting out their job roles. The code of conduct and the policy framework are developed in accordance with the ethical standards and values of the company to ensure that its business processes are conducted responsibly (Bazley, Hancock & Robinson, 2014). The governance framework has provided as per the section in detail to disclose the required information about the ethical and responsible behavior of the company. Also, the presence of responsible workplace practices such as health, safety and environment, diversity and inclusion and the policies adapted for restricting the discrimination and are developed to protect the interests of employees (2017 Corporate Governance Statement, 2017).

The audit committee developed by the Board holds the responsibility of reviewing the financial process on an annual basis. This involves examining the process of developing the financial statement to ensure that they represent reliable and faithful information to the stakeholders in accordance with the integrity principle. The audit committee implements effective internal controls for ensuring that the statements are developed in accordance with the standard accounting rules and regulations. This is essential for ensuring that the company presents a true and fair view of the financial condition to the stakeholders. Board of the company also ensures that external auditors possess all the relevant skills and knowledge to identify the material misstatement in the financial information disclosed (Groot, 2009).

Telstra’s Values, Code of Conduct, and Policy Framework

Telstra need to disclose all the materialistic information impacting the securities prices and as such it is essential to make specific announcement and develops reports that helps in providing relevant financial and non-financial information to the investors. The company develops and publishes its financial reports that contain all the required information about its financial transactions. Also, it develops its sustainability reports separately to provide all the relevant information about the sustainability strategies and policies adopted by the company. In addition to this, the material sensitive information is disclosed to the ASX so that it can be accessed by the investors. The company needs to make timely disclosure to facilitate the investment making decisions by predicting the potential of its future growth and development 2017 Corporate Governance Statement, 2017).

Telstra has implemented various policies in place to maintain effective communication with the shareholders and investors. The initiatives taken by the company in this context as per the ASX governance rules include developing briefing of investors, electronic communication and providing them a platform to ask question of interest through its online website. It also webcasts the information about the important events to the stakeholders and also feedback is gained from them. The capital allocation review provides the information about the capital structure to the stakeholders so that they have the relevant information about the proportion of debt and equity and access the potential of its future growth (2017 Corporate Governance Statement, 2017).

The company has implemented an audit and risk committee for developing a framework to manage the financial and non-financial risks. The framework is developed as per the international standard for risk management. It consists of developing the components of risk management strategy and implementing them into strategic decision-making in an integrated manner. There are three line of defense present in the risk management framework of the company to identify and mitigate the key emerging risks. A brief summary of the material risks impacting the performance of company due to its operating exposure is provided in the operating and financial review section as stated in its governance framework. The effectiveness of the risk management policies is carried out by the process of internal auditing that provides information to the Board and management about the dependence and assurance if the respective framework (O’Brien, 2007).

This principle of ASX is compiled by the Board with developing a remuneration committee that takes all the pertinent decision about the fixed and variable part of compensation provides to the directors and executives and the key management personnel (2017 Corporate Governance Statement, 2017).

The risk assessment is the important part of the audit process and it helps the auditor to check any material misstatement in the financial statement of the company. Material misstatement refers to any errors or mistakes that are left behind in the financial statement either intentionally or through error of accounts department in the company (Hay & Knechel, 2014). The risk assessment process helps the auditor to provide the auditor opinion on the true and fair view of financial statements. Risk assessment is required to be carried out every time the audit has been performed by the auditor. The risk assessment processes have three main steps that have to be followed by the auditor (Telstra: Annual Report, 2017). These three steps are inquiries from the management personal and other person who are responsible for financial reporting, analytical process that includes use of various financial tools to know the financial performance and to check for any error and lastly observations and inspections. The application of the risk assessment process in Telstra Company is as under:

• Nature of the company: Telstra is one of leading Telecommunication Company of Australia. It provides services related to telecommunication and technology to the customers of Australia. Telstra operates at bigger level and offer broad suite of connectivity, media and other content to the valuable customers of Australia. It also provides some of its services such as connectivity and enterprise services at global level. The purpose of the business is to curate the innovative technologies and various capabilities from all around the world in order to deliver the exceptional experience to their customers. In this regard the vision of the company is to provide the world class technology services to the company that empowers the people in Australia and other parts of the world to get connected with each other (Telstra: Annual Report, 2017).
• Market Overview: The telecommunication market of Australia is growing at rapid speed and it provides the opportunity for the Telstra to continue their growth in the core business with highly competitive environment.
• Business Strategy: Telstra has a strategy that helps to meet the growing demand of the customer for connectivity. Telstra has increased network that helps the customer to redefine the way they connect to the people and also provides the world class products and services to their valuable customers (Telstra: Annual Report, 2017).
• Analytical Process: In order to perform the analytical process ratio analysis has been performed for the Telstra Company for year 2016 and 2017 (Analytical Procedures, 2017).

The audit risk need to be taken into account by the auditors for overcoming the issues of material misstatement in financial statement is discussed as follows:

• Interest Rate Risk & Its Management: The interest rate risk arises from the change in the interest rates of market due to changes in the variable rate of borrowings. The company manages the interest rate risk by gaining access to various sources of funding for achieving diversification in the funding (Fleckner & Hopt, 2013).
• Liquidity Risk & Its Management: The inability of the company to maintain an adequate balance between its cash resources and the debt obligations due to occurrence of nay uncertain condition in the future. It manages the liquidity risk by developing a minimum level of cash and equivalents and investing excessive funds in different type of liquid instruments.
• Foreign Currency Risk & Its Management: It is exposed to high level of foreign currency risk due to its transactional activities. It is managed by the company with the use of hedging contracts such a forwards foreign exchange contracts (Telstra: Annual Report 2017, 2017).

References

2017 Corporate Governance Statement. 2017. Governance at Telstra. [Online]. Available at: https://www.telstra.com.au/content/dam/tcom/about-us/investors/pdf-e/Corporate-Government-Statement-2017.pdf

Analytical Procedures. 2017. [Online]. Available at: https://www.aicpa.org/Research/Standards/AuditAttest/DownloadableDocuments/AU-C-00520.pdf [Accessed on: 5 May 2018].

Bazley, M., Hancock, P. & Robinson, P. 2014. Contemporary Accounting PDF. Cengage Learning Australia.

Fleckner, A.M. & Hopt, K.J. 2013. Comparative Corporate Governance: A Functional and International Analysis. Cambridge University Press.

Groot, C.D. 2009. Corporate Governance as a Limited Legal Concept. Kluwer Law International.

Hay, D. & Knechel, R. 2014. The Routledge Companion to Auditing. Routledge.

Mallin, C.A. 2016. Handbook on Corporate Governance in Financial Institutions. Edward Elgar Publishing.

O’Brien, J. 2007. Private Equity, Corporate Governance and the Dynamics of Capital Market Regulation. Imperial College Press.

Telstra: Annual Report 2017. 2017. [Online]. Available at: https://www.telstra.com.au/content/dam/tcom/about-us/investors/pdf-e/Annual-Report-2017.PDF [Accessed on: 5 May 2018].

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