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ACCA Paper F1 Accountant in business

REVISION Part B

Chapter 5

Study Text Chapter 1

Business organisation, structure, and strategy

Chapter 6

Study Text Chapter 6

Organisational culture and Committees

Chapter 7

Study Text Chapter 7

Corporate governance and social responsibility

Corporate governance concepts


Fairness Openness/transparency Independence/objectivity Probity/honesty Responsibility Accountably Reputation Judgment Integrity

Non-Executive Directors (NEDs)


To monitor the performance of Executives Recommend hiring and firing Decide on remuneration of Executives + Chair Monitor the systems of financial reporting Risk management and Internal control systems Contribute to the strategy

Advantages of NEDs
External experience and knowledge which executive directors do not possess

Problems with NEDs

Lack of independence Cross directorship Wider perspective Difficulty imposing their views upon the Comfort factor for third parties such as investors or board suppliers. Limited time they can Strong, independent element devote to the role

Audit committee
All members should independent NEDs At least one member should be of financial and accounting background The chairman of the company can be chairman of the audit committee as long as he is an independent NED
NEDs should liaise with external audit, supervise internal audit, and review the annual accounts and internal controls. Review of financial statements and systems Liaison with external auditors Review of internal audit Review of internal control Investigations Review of risk management

Remuneration Committee
Must be formed with NEDs Remuneration should be dependent upon organisation and individual performance. Non-disclosure Remuneration of Executives + Chair Set policies regarding directors pay Design and negotiate individual pay packages Agree expenses of senior executives + Chair

Remuneration of Directors
Enough to attract, retain and motivate Significant proportion should be long term performance-related, which can be achieved by building in rewards such as shares, share options, pensions linked to performance Should consider industry pay levels NED remuneration should not be performance related, their remuneration will be made up of fees only Across-the-board pay and incentives awards are entirely inappropriate, as they fail to acknowledge differentials in the performance of individual directors