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Assignment on Cadbury Code

Submitted to

Shaikh Masrick
Assistant professor
Department of Finance
Jagannath University

Submitted by


Md. Toaha


Md.Maruf Alam


Nargis Akter


Niad mahmud






Assignment on
Cadbury Code

What is Cadbury Code?

Cadbury code, titled Financial Aspects of Corporate

Governance, is a report issued by "The Committee on the
Financial Aspects of Corporate Governance" chaired by
Adrian Cadbury that sets out recommendations on the
arrangement of company boards and accounting systems
to mitigate corporate governance risks and failures.

The report was published in draft version in May 1992. Its

revised and final version was issued in December of the
same year.

The report's recommendations have been used to varying

degrees to establish other codes such as those of the
European Union, the United States, the World Bank etc.


Why committee made?

The Committees objective is to help to raise the standards of corporate

governance and
the level of confidence in financial
reporting and auditing by setting out
clearly what it sees as the respective
responsibilities of those
involved(shareholders, directors, auditors)
and what it believes is expected of them.

Committees members
Committees members were as follows
Sir Adrian Cadbury (Chairman)
Ian Butler
Council Member, CBI and former Chairman, CBI Companies
Jim Butler
Senior Partner, KPMG Peat Marwick
Jonathan Charkham
Adviser to the Governor, Bank of England
Hugh Collum
Chairman, Hundred Group of Finance Directors
Sir Ron Dearing
Chairman, Financial Reporting Council

Committees members continues

Andrew Likierman
Professor of Accounting and Financial Control, London
Business School
Nigel Macdonald
Vice President, Institute of Chartered Accountants of Scotland
Mike Sandland
Chairman, Institutional Shareholder-s Committee
Mark Sheldon
President, Law Society
Sir Andrew Hugh Smith
Chairman, London Stock Exchange
Sir Dermot de Trafford, Bt
Chairman, Institute of Directors

Reasons for setting up the

Cadbury was the result of several high profile company
The Committee was set up in May 1991 by the Financial
Reporting Council, the London Stock Exchange and the
accountancy profession to address the financial aspects of
corporate governance.
Its sponsors were concerned at the perceived low level of
confidence both in financial reporting and in the ability of
auditors to provide the safeguards.
The underlying factors were seen as the looseness of accounting standards
the absence of a clear framework for ensuring that directors kept
under review the controls in their business and
competitive pressures both on companies and on auditors which
made it difficult for auditors to stand up to demanding boards.

Corporate governance

Corporate governance is the system by which

companies are directed and controlled. Boards of directors
are responsible for the governance of their companies.
The shareholders role in governance is to appoint the
directors and the auditors and to satisfy themselves that
an appropriate governance structure is in place.
The responsibilities of the board include setting the
companys strategic aims, providing the leadership to put
them into effect, supervising the management of the
business and reporting to shareholders on their
The boards actions are subject to laws, regulations and
the shareholders in general meeting.

Code Principles

The principles on which the Code is based are

those of
Integrity and

Code Principles continues

Openness on the part of companies is the

basis for the confidence which needs to exist
between business and all those who have a
stake( shareholders, environment, customers,
directors, societies etc.) in its success.
An open approach to the disclosure of
information contributes to the efficient
working of the market economy, promise
boards to take effective action and allows
companies more thoroughly

Code Principles continues

Integrity means both straightforward
dealing and completeness. What is required
of financial reporting is that it should be
honest and that it should present a
balanced picture of the state of the
companys affairs.
The integrity of reports depends on the
integrity of those who prepare and present

Code Principles continues

Accountability means to ensure that
management is accountable to the Board of
Directors and ensure that the Board of
Directors is accountable to shareholders.
Boards of directors need to do so through
the quality of the information which they
provide to shareholders, and shareholders
through their willingness to exercise their
responsibilities as owners.


focused on the control and reporting functions
of boards, and on the role of auditors.
The Committees purpose was to review
corporate governance specifically related to
financial reporting and accountability.
recommendations is a Code of Best Practice
designed to achieve the necessary high
standards of corporate behavior.

Recommendation continues
Compliance/ agreement with the Code of Best Practice
The boards of all listed companies registered in the UK should
comply with the Code of Best Practice. As many other companies
as possible should aim at meeting its requirements.
Listed companies reporting in respect of years ending after 30 June
1993 should make a statement about their compliance with the
Code in the report and accounts and give reasons for any areas of
Companies statements of compliance should be reviewed by the
auditors before publication. The review should cover only those
parts of the compliance statement which relate to provisions of the
Code where compliance can be objectively verified. The Auditing
Practices Board should consider guidance for auditors accordingly
All parties concerned with corporate governance should use their
influence to encourage compliance with the Code.

Thank you