Construction Map Internal Control And Audit: A Case Study Of Wesfarmers Limited

Corporate Governance and Risk Assessment

Discuss About The Construction Map Internal Control And Audit.

Risk assessment and proper implementation of the corporate governance principles are two of the most important functions which are followed by top companies worldwide.  Proper assessment of the risks of various kinds in terms of financial character are to be analysed by the auditor, which helps to unfurl the wrongdoings advocated by the companies. In the same way when a company follows the necessary principles of corporate governance, then an all-round cohesion is achieved by the company which helps it in a variety of ways.   Each and every company must follow the standards set up by the governing body of their respective countries. If the standards advocated by these entities are not followed, then such action could have a detrimental impact upon the interests of the various stakeholders of the company. In this project report, the risk assessment procedures and principles of corporate governance which are followed in Wesfarmers Limited have been reported and analysed in the light of the principles laid down by ASX and AUASB. The details of the company in terms of its nature, working and financial performance, all have been stated and analysed in this report.

Every organisation requires a set of rules and regulation for the purpose of proper management and working. In such areas, the role of corporate governance becomes more prominent and it comes to the rescue by enumerating the set of guidelines and instructions, which needs to be followed by the concerned organisation. The process of corporate governance broadly involves properly balancing the benefits of a company’s stakeholders, such customers, shareholders, management, suppliers, financiers, government and the community (Asx.com.au, 2018).

The Australian Securities Exchange is the premier securities exchange of Australia and is governed by the ASX Limited. It deals with the various trading of securities in the Australian sub-continent. The organisation has advocated various principles for the proper implementation of corporate governance in the daily working of the Australian companies (Asx.com.au, 2018). These eight principles as advocated by ASX have been laid down below, which are to be followed by the Australian companies for their swift and hassle free working:

• Lay solid foundations for management and oversight:
• Structure the board to add value:
• Act ethically and responsibly
• Safeguard integrity in corporate reporting
• Make timely and balanced disclosure
• Respect the rights of security holders
• Recognise and manage risk
• Remunerate fairly and responsibly

Being, one of the most important corporate entities in the Australian and international business arena, Wesfarmers strives to effectively full fill all the principles laid down by ASX. Their implementation is mentioned below:

1. Lay solid foundations for management and oversight: Each and every organisation works and function on the basis of the guidelines and the path shown by its group of directors. This group of directors which constitute the board take all the important decisions of the company and oversee the performances of the organisation functionaries. They ensure that all the members, wings and departments duly follow the prescribed principles of corporate governance.

• Looking whether management is following these principles..
• Overseeing the company’s financial performance.
• Reviewing of business operations and development plans of each sections of the company.
• Intensive care of the proper enactment of the safety measures and principles.
• Enhancement of safety awareness at workplace.
• Reviewing talent management and development
• Continuous evaluation and monitoring of growth opportunities to complement the existing portfolios present in the company.

Board members	Role:
Richard Goyder	CEO
Rob Scott	Deputy CEO
Terry Bowen	Finance Director
Anthony Gianotti	Deputy Chief Financial Officer
Maya Vanden Driesen	Group General Counsel
David Baxby	Managing Director, Wesfarmers Industrials

Each and every company’s board’s performance must be periodically evaluated by an independent expert, failing to do so, the company might come under autocratic control. As a result of which, an independent group known as the nomination committee is responsible to undertake this task. They do so in a stipulated time frame and ensure that the board is kept on check.

Wesfarmers’ Implementation of ASX Principles

The review process for both the Board and its committees involves:

(i) Completion of a questionnaire survey by each board member.

 (ii) The preparation of a feedback report of the performances of each director and board member.

 (iii)  Consequently, the board members formally discuss the areas where improvement are required and thereby essential steps are taken for implementation.

Structure the board to add value: Wesfarmers has a very committed board which puts significant emphasis upon the interests of its stakeholders. The board has a total of 13 members, each competent in undertaking the challenges of modern business and board. Capital markets, finance and banking, marketing, human resources and corporate sustainability are some of the key areas represented by the board members, which add dynamism and value to the working of the company.

Act ethically and responsibly: This Company strongly advocates the need for implementation of strong ethics and other allied principles in the day to day functioning of the members and departments. The company follows the three main principles of accountability, transparency and braveness in its operations. The Wesfarmers board carries out its duties and responsibilities with regard to the values, the Group’s Code of Conduct and the charter of the board. It regularly reviews these policies in order to ensure that they follow the standards set by the expectations of people.

Safeguard integrity in corporate reporting: The primary responsibility of overseeing the audit related activities of Wesfarmers belongs to its Audit committee. The Audit and Risk Committee upholds direct, unhindered access to the company’s external auditor, internal audit and management’s working.

Make timely and balanced disclosure: Wesfarmers strives to maintain a 100% transparency in its financial reporting. The management ensures that the company discloses its financial statements in a time bound manner and without any frauds and errors.

Respect the rights of security holder: Wesfarmers places its shareholders upon the loftiest position in its management strata. They ensure that the shareholders are able to exercise their rights and are regularly provided with authentic financial information periodically.

Recognise and manage risk: The Company advocates a strong risk management framework to look after its financial risks. It is periodically reviewed by the board on a yearly basis.

Remunerate fairly and responsibly: Wesfarmers is committed in providing a remuneration which is solely focused on driving a performance based culture and work based compensation. The remuneration of the directors and the MD’s are divided into fixed and variable types. The incentives and the various other plans are plans are completely performance based and these plans are regularly examined by the auditors for any discrepancies.

Products and Services of Wesfarmers

By nature of a business, the inherent meaning and the business details of the organisation is taken into account. The true characteristics of any business organisation is reflected in the kind of work they engage themselves in. In the case of this assignment report, an enquiry into the nature of business is necessary into the selected company, which is Wesfarmers in this case. When a thorough understanding and analysis of the Wesfarmers has been done, it becomes pretty evident that the company engages itself in various kinds of services and does not engage in producing or rendering any single kind of product or service. On the contrary, the company produces a variety of products and services. The company provides various components which are needed in factories and other allied places. These products are raw in nature and they cater to the specific chemical as well as energy requirements of them. Along with this, the company oversees its hospitality section as well as the company actively pursues its retail marketing sector which involves setting up and maintenance of various retail chains.

Wesfarmer’s market sections consists of Coles; various home improvement and department stores, which consists of Kmart and Target, and various other kinds of office works; industrials, which comprise resources, WIS and others. Coles operates as a supermarket retailer, which conducts its operations across 770 supermarkets. Bunnings is a retail outlet which provides home improvement products and outdoor living products. It predominantly operates in New Zealand and Australia. Kmart, again is a retailer with roughly over 210 stores all over Australia and New Zealand (Wesfarmers.com.au, 2018). Target works in a network of over 300 stores and sells a variety of products for the modern family, including clothing, home wares and general stocks. Office works operates as a dealer and regularly supplies office products and different types of solutions for households, education and homes.

 Wesfarmers operates with four main core values and strives to defend them at all times which are boldness, integrity, accountability and openness. It strives to create and maintain value business strategy (Forouzanfar 2013). Such strategies form the crux of Wesfarmers and have been mentioned below:

• Strengthening present business through existing business operations and dynamic customer needs.
• Renewing the company portfolios through value added transactions
• Ensuring all round sustainability through responsible long term planning and management.
• Securing growth opportunities in new areas of marketing through different entrepreneurial enterprises.

The Board diagnoses that a far-reaching culture is important to an efficient risk management charter. The company has placed a highly ethical code of conduct and it helps in guiding the company in its operations. The management is responsible for the company’s daily compliance with risk management systems. Management monitors amenability with, and the efficacy of the risk management systems and looks at it on a divisional level. Wesfarmers’ senior management reports to the Board on the adequacy of the risk management systems and processes on a consolidated basis across the Group (Beck, M.J and Mauldin 2014). This helps the board in recognising the areas to strengthen the company’s culture and approach to risk management.

Group	Functions
Director’s board	Revising, appreciative, and controlling of the company’s risk management systems.
Managing and Finance Director	Assessing and providing assurance to the board about the proper functioning of the risk management systems.
Management	Implementation and maintenance of the risk management systems.
Audit and risk committee	Overlooking the internal controls, assurance policies, which are used by the company to recognise and manage the risks.

According to ASA 315, there are certain requirements which needs to be adhered to by the auditor in order to efficiently perform the audit function. These requirements are as follows:

• Enquiries are to be conducted with the management and other experts of the company, who has the best knowledge regarding material misstatements and other financial matters of the company (Coetzee and Lubbe, 2014).
• Analytical procedures and inspection also need to be performed by the auditor.
• Information needs to be obtained from the client or from past auditors who have performed audit functions of the client (Wesfarmers) in the past. This shall help the auditors to have a better background information of Wesfarmers and conduct a swift and efficient auditing operation (Vovchenko et al, 2017).

Conclusion:

The concerned report delves into the corporate governance principles and the risk assessment which are followed in Wesfarmers in accordance with the standards laid down by ASUSB and ASX.  Risk assessment and following the standards of corporate governance are very important for each and every company. This process delves into the various procedures and principles of ASX and their proper implementation as per Wesfarmer’s management have been delved into. Wesfarmers is a leading Australian retail company and has been successfully following all the standards of both ASX and ASUSB.

References:

Asx.com.au. (2018). [online] Available at: https://www.asx.com.au/documents/asx-compliance/cgc-principles-and-recommendations-3rd-edn.pdf [Accessed 14 Apr. 2018].

Asx.com.au. (2018). Corporate Governance Council. [online] Available at: https://www.asx.com.au/regulation/corporate-governance-council.htm [Accessed 14 Apr. 2018].

Beck, M.J. and Mauldin, E.G., 2014. Who’s really in charge? Audit committee versus CFO power and audit fees. The Accounting Review, 89(6), pp.2057-2085.

Forbes.com. (2018). Forbes Welcome. [online] Available at: https://www.forbes.com/forbes/welcome/?toURL=https://www.forbes.com/sites/dinamedland/2015/02/10/corporate-governance-is-the-very-essence-of-a-business-stephen-green/&refURL=https://www.google.com/&referrer=https://www.google.com/ [Accessed 14 Apr. 2018].

Forouzanfar, M.H., Alexander, L., Anderson, H.R., Bachman, V.F., Biryukov, S., Brauer, M., BurneProper management of risks:al, and national comparative risk assessment of 79 behavioural, environmental and occupational, and metabolic risks or clusters of risks in 188 countries, 1990–2013: a systematic analysis for the Global Burden of Disease Study 2013. The Lancet, 386(10010), pp.2287-2323.

Vovchenko, G.N., Holina, G.M., Orobinskiy, S.A. and Sichev, A.R., 2017. Ensuring financial stability of companies on the basis of international experience in construction of risks maps, internal control and audit. European Research Studies Journal, 20(1), pp.350-368.

Wesfarmers.com.au. (2018). [online] Available at: https://www.wesfarmers.com.au/docs/default-source/default-document-library/2017-annual-report.pdf?sfvrsn=0 [Accessed 14 Apr. 2018].

Wesfarmers.com.au. (2018). Login. [online] Available at: https://www.wesfarmers.com.au/who-we-are/corporate-governance [Accessed 14 Apr. 2018].