Discuss about the Evaluation of Blackmores Ltd.
In the corporate environment of Australia, there has been several alterations in the industry of consumer staples. In relation to Blackmores Ltd, the company is involved in the development, marketing, and sales of health products for animal and humans that includes mineral, herbal, and vitamin nutritional supplements. The company’s primary segments comprise of China, Australia, and others. The company was founded in the year 1930 and is in Warriewood, Australia. It offers its items and services through pharmacies, online stores, merchandizers, groceries, health food stores, and various practitioners. Because of its strategies and measures, the company has gained the position of number one health food store brand in relation to ‘Fusion Health’ and number one practitioner brand in relation to Bioceuticals. Moreover, this is the reason why the company has been regarded as the most trusted brand in relation to supplements and vitamins in Australia (Blackmore, 2017). Overall, the strong operations in 2017 have assisted Blackmores in attaining a major position in the entire industry.
Blackmores Ltd has appropriately adhered to the principles of corporate governance as listed under the recommendations of ASX. This can also be proved through its annual report and statement of corporate governance as disclosed under reporting guidelines. The various corporate governance principles adhered to by the company are as follows:
Laying enhanced foundations for oversight and management
The company’s Board is liable for the governance framework that operates under the approved policies, practices, and charters of the Board. Further, the board committee assists the Board in fulfilling their role of governance. Moreover, such committee together with the Board reviews the governance framework of the company and its related practices to ensure they align with statutory changes. The Board has also designed a formal charter that sets out structure, composition, and responsibilities of the Board. The matters that necessitate board approval are also included in such charter (Peirson et. al, 2015). Besides, prior to the appointment of directors, the Board adopts proper checks and offers shareholders with significant information that is important to the decision of re-electing or electing a director. Nevertheless, such directors attain formal engagement letters that sets out conditions, terms, and expectations of their engagement. The company also has comprehensive guidelines in relation to performance of executives (Merchant, 2012). These guidelines are underpinned by measures and objectives developed through aggregate processes of performance management. However, there is also an induction process to offer a concise experience for senior executives that ensures an efficient induction into the company’s practices and culture.
Structuring of board to add value
The company has a nominations committee in place that consists of the board and is a committee of the same. Further, the meetings and proceedings of such committee are regulated by the provisions of the Constitution. The main objective of such committee is to assist and advise the board in catering its obligations towards the shareholders (Blackmore, 2017). Moreover, the Board also reviews such composition and evaluates nominations for fresh appointments to make sure there is right balance of experience and skills. In addition to this, the Board also evaluates the independence of all non-executive directors. Moreover, the company does not consider time-period as a significant disqualifying criterion for values and independence of directors in serving the Board. The Board also reviews current skills required by the directors so that any beneficial opportunities for the future are not disregarded by the company.
Acting ethically and responsibly
The company has a code of conduct for its employees, senior executives, and directors that was re-launched in 2016. It ensures that the employees and directors must operate in a manner that is consistent with effective practices of commercial and public business and are also committed to transparent and open communications. Such code of conduct offers employees and directors with guidance on what is considered as acceptable behaviour. Overall, the company requires that all its employees, managers, and directors are trustworthy, honest, and committed to enhanced standards of business, professional, and personal behaviour.
Protecting integrity in financial reporting
The company is committed to a transparent approach for reporting and auditing of financial performance. The Board has also framed audit and risk committee for such purpose. Moreover, it is also required that the directors have necessary knowledge and skills to enhance the approach of reporting, thereby facilitating in assisting users in their decision-making processes (Blackmore, 2017). Furthermore, prior to the approval of board in relation to the company’s financial statements, the Board attains a declaration from the CFO and CEO that in their viewpoint, the company’s financial records are appropriately maintained and that the financial statements adequately adhere to the required accounting standards, thereby offering a true and fair view of the company’s financial performance and position.
Make balanced and timely disclosure
The company has framed various practices and policies to ensure that the disclosure of significant matters associated to the company occurs in a honest, timely, and balanced way that can ensure equivalent access on the part of investors to materialistic information including the company’s governance, ownership, performance, and position (Blackmore, 2017). Furthermore, a continuous disclosure policy of the company is also reflected in its website wherein stakeholders can attain the same for making relevant decisions.
Respecting shareholders’ rights
Blackmores Ltd strives to offer to its shareholders and investing public significant information in a regular, detailed, timely, and factual manner. Furthermore, the rights of shareholders are respected through communication of information from the annual report, ASX disclosures, explanatory and notice memoranda, company’s website, etc. Such shareholders also have the option to attain electronical communications from the company and the registry. The Board also ensures that the annual report comprises of important information about the company’s operations.
Manage and recognize risk
There is an audit and risk committee designed for recognizing and managing risks. Moreover, the Board is responsible to maintain, establish, demonstrate, and operate an adequate framework of business controls. Such framework comprises of all affairs whether technical, commercial, operational, administrative, or financial. The Board is also liable for monitoring the system of internal controls as there is no prevalence of internal audit function. However, specialists are engaged to evaluate and review control processes. Nevertheless, the board also ensures that recommendations offered by external advisers and auditors are investigated and where required, corrective actions are taken to ensure prevalence of proper internal control environment practices (Bauer & Hann, 2010).
Remunerate responsibly and fairly
A People and Remuneration Committee has been established by the company whose main duty is to consider the strategy of remuneration and to make recommendations that are in the best company interests and its shareholders as well. The company remunerates its people responsibly and fairly and such policy is linked and transparent to both the company’s and individual’s performance (Benabou et. al, 2010).
The company Blackmores Ltd has various segments that are vulnerable to several types of risks like operational risks, financial risks, strategic risks, and other risks. This is the reason why the company has designed a framework of risk management within its operations for managing such material risks (Lapsley, 2012).
The company’s strategy is focused on the following areas:
ASA-570 plays a key role in relation to management of risks in an organization. It requires the usage of analytical processes that must be used by the auditors to facilitate proper audit processes. This standard also provides how such analytical processes can assist auditors in forming an opinion upon the financial statements. Further, it also requires that the auditors must investigate the differences or fluctuations from the forecasted figures. Nonetheless, based on this standard, the main goal of an auditor must be to attain accurate and reliable audit evidence with the provision of substantive analytical processes and thereafter, perform and design the same to check the accuracy and consistency of the financial statements (Carmichael & Graham, 2012).
The analytical processes used by auditors comprises of the analysis methods like regression analysis, the calculation of ratios and comparison of the same with that of prior years as it helps in shedding light on the performance, and comparing the balance in account of trial balance with the previous year figure (Elder et. al, 2010).
Overall, audit risk can be evaluated through use of analytical and audit processes. In the first scenario, audit processes can be used to frame an audit strategy to determine the level of risk associated to the business. While some risks may be inherent, yet some risks may also emerge due to the company’s business affairs (Gay & Simnet, 2015). In relation to this, analytical ratios assist in advocating about the risk to the business owners. The auditor can shed light on the performance of the company through an analysis of the ratios. Going by the financial statements of the company, it can be noted that GP ratio enhanced in the past five years together with an increment of the net profit ratio. Hence, the auditor can comment that the performance of the company and business was significantly high. The auditor can further comment from the ratios that the liquidity of the business is significantly high as the current ratio and quick ratio projects the presence of liquidity (Needles & Powers, 2013). Overall, significant steps to mitigate risk can be facilitated through appointment of internal auditors and experts in various important fields so the current ratios are adequate to meet the business obligations. The business can undertake risky since it has the presence of liquidity (Laux, 2014). Moreover, adoption of digital technology and segments can also assist auditors in getting rid of loss of financial information.
|
2013 |
2014 |
2015 |
2016 |
2017 |
|
|
GP ratio = |
30.88685 |
30.83573 |
68.64407 |
70.15342 |
65.94517 |
|
NP ratio= |
7.64526 |
7.204611 |
9.957627 |
13.947 |
8.513709 |
|
Current ratio = |
2.755556 |
2.258621 |
1.634783 |
1.536458 |
1.811189 |
|
Quick ratio = |
1.866667 |
1.586207 |
1.295652 |
0.932292 |
1.216783 |
Conclusion
From the corporate governance practices of Blackmores Ltd, it can be seen that the company has duly focused on the same, thereby offering itself a stage to become a leader in the field of vitamins and supplements. Besides, the decision of not acting illegally and immorally has also played a key role in enhancing the company’s competitive position in the industry. Moreover, the importance is given to disclosure strategies clearly shed light on the fact that the company focuses towards its stakeholders in an effective way. Nevertheless, ratios also prove that the company has properly performed in 2017.
References
Bauer, R. and Hann, D. (2010) Corporate environmental management and credit risk. Maastricht University.
Benabou, R. and Tirole, R. (2010) Individual and Corporate Social responsibility. Ecnomica. [online]. 11, pp. 1-19. Available from: https://doi.org/10.1111/j.1468-0335.2009.00843.x [Accessed 26 April 2018]
Blackmore. (2017) Blackmores annual report and accounts 2017 [online]. Available from: https://www.blackmores.com.au/about-us/investor-centre/annual-and-half-year-reports [Accessed 27 April 2018]
Carmichael, D.R. and Graham, L. 2012. Accountants Handbook. Financial Accounting and General Topics, John Wiley & Sons.
Elder, J. R, Beasley S. M. and Arens A. A. (2010) Auditing and Assurance Services. Person Education, New Jersey: USA
Francis, R. N., Harrast, S., Mattingly, J. and Olsen, L. (2013) The relation between accounting conservatism and corporate social performance: An empirical investigation. Business and Society Review. [online]. 118 (2), p. 193 – 222. Available from: doi: 10.1111/basr.12008 [Accessed 26 April 2018]
Gay, G. and Simnet, R. (2015) Auditing and Assurance Services. McGraw Hill
Laux, B. (2014) Discussion of The role of revenue recognition in performance reporting. Accounting and Business Research. [online]. 44(4), 380-382. Available from: https://doi.org/10.1080/00014788.2014.897867
Leo, K. J. (2011). Company Accounting. Boston:McGraw Hill
making: Achef’s quest for creative freedom. Long range planning [online]. 43, 408-430. Available from: https://doi.org/10.1002/job.461 [18 April 2018]
Merchant, K. A. (2012) Making Management Accounting Research More Useful. Pacific Accounting Review. [online]. 24(3), 1-34. Available from: https://pdfs.semanticscholar.org/6ccf/f78a452763f17ed5e4f4ddc6b96703801403.pdf Needles, B.E. & Powers, M. (2013) Principles of Financial Accounting. Financial Accounting Series: Cengage Learning.
Peirson, G, Brown, R., Easton, S, Howard, P. and Pinder, S. (2015) Business Finance, 12th ed. North Ryde: McGraw-Hill Australia.
Lapsley, I. (2012) Commentary: Financial Accountability & Management. Qualitative Research in Accounting & Management. [online]. 9(3), pp. 291-292. Available from https://doi.org/10.1111/1468-0408.00081
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