The Impact of Corporate Collapse on Citizens in Australia
Question:
Discuss about the Corporate Governance System Of The Australian Market.
It would be relatively difficult to discover any individual who is totally invulnerable to the outcomes of the 2007– 8 worldwide money related emergency. Representatives are especially helpless against such monetary calamities. Corporate falls frequently result in enormous occupation misfortunes and neglected representative privileges. The Australian government has taken activities to ensure worker interests in case of indebtedness. Such measures incorporate particular treatment gave by the Corporations Act 2001 through to organizing worker privileges when indebtedness happens (Clarke, Dean and Oliver 2012).
Two of the biggest corporate collapse that can be taken into account are; firstly, Dick Smith’s the publicly listed electronics giant collapsed despite outstanding sales performance because senior management prioritized revenue expansion ahead of sustainable growth. This was one of the Biggest Collapse listed In Australia (Dignam, and Galanis 2013). The second instance that can be taken into account is the collapse of HIH Insurance which was Australia’s second largest insurance company.
The main aim of this project is to analyze the corporate collapse all which has happened in the Australian Continent and moved the roots of the Australian solvency and affected the Australian continent in a negative way. The paper will discuss on how the government safe guarded the citizen from the effect of Corporate Collapse.
The citizen of the Australian continent would had suffered a lot due to the different corporate collapse that happened in Australia but they survived or resisted to these corporate collapse because of the rules and regulation made by the government which had the only purpose to protect the citizen from corporate collapse.
The HIH insurance company affected all the user of their accounting information directly as well as indirectly. The peoples that bought insurance policy from the company also suffered as they did not get the amount that they invested as well as the services that was about to be rendered to them. The government tried on their own way to make rules and regulation to protect the people as well as related internal as well external users of the accounting information (Carnegie and O’Connell 2014).
The Government took various steps to give relief to the people during HIH insurance company collapse some of the steps taken by the government are:
- The government endeavored to straightforwardly consult with other insurance agencies with a dream to them assuming control over the approaches which are terrible;
- Its aim to keep in touch with the Premiers and Chief Ministers looking for their co-activity to embrace an exhaustive audit of State and Territory control with a view to presenting single national protection plots in mandatory outsider, specialists’ pay and manufacturers’ guarantee protection; and
- It would quick track administrative changes to the general protection industry to enhance capital sufficiency.
- The Government’s choice to hold a Royal Commission into all issues identifying with the HIH fall. At the date of composing, the terms of reference for the Royal Commission had not be discharged.
- A bundle worth more than $500 million to help those individuals in hardship because of the crumple of HIH. This bundle is financed from the Federal Government spending plan.
Internal users (Primary Users) of accounting information include the following:
- Management: The management require the accounting information of the company for analyzing the organization’s performance and situation and taking initiative to go through such problems. The management needs the accounting information to get the proper picture of the business as they are responsible for running the business (Du Plessis, Hargovan and Harris 2018). During corporate collapse they are answerable and are responsible of the happening so they should keep proper track of the accounting information to provide evidence and be safe from interrogation.
- Employees: they use accounting information for checking company’s productivity and its outcome on their upcoming reward and job security. During corporate collapse the employees are the ultimate sufferer as they have a big chance to be job less so they also require accounting information for the purpose of being insured from unemployment (Khairi, and Baridwan, 2015).
- Owners: for analyzing the viability and profitability of their investment and determining any future course of action. The owner is the ultimate sufferer in a corporate collapse as he becomes insolvent at some cases and so he should take proper care to avoid situation or consequences as he can incur huge loss (Smith, and Binti Puasa, 2016).
Internal users of accounting information gets the accounting reports in forms of different accounting tool such as accounts, budgets, forecast and lastly the financial statement of the company.
External users those users of accounting information who does not participate in the business itself examples of such external users are:
- Creditors: use the accounting information for checking the creditability of the company, they are the ultimate or the vital position holder who help to run the company in a smooth way so their protection is vital. And to keep them protected from the consequences of corporate collapse.
- Tax Authorities: The tax authorities need accounting information for determining the credibility of the tax returns filed on behalf of the company. They work on behalf of the government so they provide information to the government after going through the accounting information provided by the company gets a view that there are any chances of the corporate collapse.
- Investors: for observing the financial condition of the business concern for investing purpose the internal users also need to know about the chances of corporate collapse.
- Customers: To assess the economic situation of its suppliers and they also suffer the consequences of corporate collapse both directly and indirectly. Directly in a way that they do not get supply of the product that they are used to and indirectly the inflation caused in the market due to the corporate collapse.
- Regulatory Authorities: the regulatory authorities also need to know the companies accounting information to make rules and regulation regarding the company if there are chances of corporate collapse.
- Share holders of a company are at a loss next to the owner during a corporate collapse as they invest lot of amount as fund for the company but they are indirectly affected by corporate collapse as they also bare the loss for the company as they have participation in winding up of the company (Leung et al.2016).
- Regulatory bodies make rules for the protection of the people suffering from the consequences of corporate loss and the indirect effect being taking all steps to make new rules and regulation every time for this purpose.
- The customers have both direct and indirect effect on them by the corporate collapse they does not get the supply of the product or services that they have already bought where as they suffer the economic situation prevailing in the country which is due to corporate collapse (Yahanpath, and Islam, 2016).
Conclusion
It can be concluded that the Australian government is concerned with the interest of the public and the problem faced by them. The government has taken immense initiatives to keep the people shock prove from the stiffness of the corporate collapse situation. Sometimes the government has succeeded to help the people to undergo the situation of corporate collapse and sometimes it has succeeded to achieve its goal. But every time the country faced a corporate collapse the government has taken up new steps to fight with such problems. Similar in case of Dick Smith Company and HIH insurance company the government tried its level best to go through the consequences of the corporate collapse faced by the Australian continent.
References
Carnegie, G.D. and O’Connell, B.T., 2014. A longitudinal study of the interplay of corporate collapse, accounting failure and governance change in Australia: Early 1890s to early 2000s. Critical Perspectives on Accounting, 25(6), pp.446-468.
Clarke, F., Dean, G. and Oliver, K., 2015. Corporate collapse: Accounting, regulatory and ethical failure. Cambridge University Press.
Dignam, A. and Galanis, M., 2013. Australia inside-out: The corporate governance system of the Australian listed market. Melb. UL Rev., 28, p.623.
Du Plessis, J.J., Hargovan, A. and Harris, J., 2018. Principles of contemporary corporate governance. Cambridge University Press.
Khairi, M.S. and Baridwan, Z., 2015. An empirical study on organizational acceptance accounting information systems in Sharia banking. The International Journal of Accounting and Business Society, 23(1), pp.97-122.
Leung, P., Coram, P., Cooper, B.J. and Richardson, P., 2014. Modern Auditing and Assurance Services 6e. Wiley.
Smith, J. and Binti Puasa, S., 2016, February. Critical factors of accounting information systems (AIS) effectiveness: a qualitative study of the Malaysian federal government. In British Accounting & Finance Association Annual Conference 2016.
Yahanpath, N. and Islam, S., 2016. AN ATTEMPT TO RE-BALANCE THE BALANCED SCORECARD TOWARDS A SUSTAINABLE PERFORMANCE MEASUREMENT SYSTEM. Asia-Pacific Management Accounting Journal, 11(2).
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