Corporate Governance At Amcor Limited

Board and Management Roles and Responsibilities

Discuss about the Audit, Assurance and Compliance of Amcor Limited.

At Amcor Limited, the company engages in achieving as well as representing the highest standards of corporate governance. Addition to that, the Board of Directors is responsible to refine as well as bring improvement in the governance framework so that shareholders are informed regarding any changes made within the company. The main corporate governance of Amcor Limited had been summarized in the statement that is available in the website of the corporation.

At Amcor Limited, it is the accountability of the Board of Directors to look at the corporate governance as well as provide strategic guidance at the same time. The Board of Directors in this company guides as well as monitors the trade and activities within Amcor Limited on behalf of the stakeholders by whom they are electable and accountable. The management of Amcor Limited has to develop business plans, prepare budgets as well as involve in business approach for the Board’s consideration and to get it accepted by the Board. The management needs to operate the trade within the parameters as set by the Board on timely basis as well as even informing the Board regarding all the material developments relating to business (Vasarhelyi, Alles and Kogan 2018). Therefore, Amcor Limited had established as well as disclosed their roles and responsibilities of its Board and Management and is performing well for smooth functioning of business enterprise.

The Composition of Board members is determined based on criteria as set out in the Constitution of the company as well as Board Charter. The Board Member has a good mix of skills as well as diversity that need to get align with the strategy planned by the company that result in good corporate governance and oversight (Vanstraelen and Schelleman 2017). Therefore, Amcor Limited has Board of appropriate size, composition as well as skills and commitment that enables in discharging their duties in an effective way.

It is the responsibility of the Directors to keep the Board recommend on an continuing basis of any interest. It is the Board who had been engaged in developing procedures so that they can assist Directors for disclosing potential conflicts of interest on yearly basis. At Amcor Limited, they believe in recognizing the importance of honesty as well as integrity and honesty at the time of dealing with business (Cuadrado-Ballesteros, Martínez-Ferrero and García-Sánchez 2017). The company is committed towards increasing value with their shareholders so that they can fulfill the responsibilities to become good corporate citizen.

Composition of Board Members

At Amcor Limited, they encourage co-workers where they can account any unlawful activity in good faith. The company tries to give an atmosphere free from victimization and any inappropriate behavior. Furthermore, the business operates a Whistleblower service that can help the workers for reporting any potential misconduct they face while working at the company. It is the responsibility of the Whistleblower Committee to protect co-workers from victimized as a consequence of making account of supposed misconduct. Therefore, Amcor Limited acts ethically and responsibly in their operations.

PWC was selected as external auditor by the shareholders. Addition to that, the External auditor is responsible to present an annual declaration of their autonomy and report it to the Audit Committee. Here, the external auditor had successfully met with the Audit and observance Committee without supervision being present at each Committee meeting (Schmidt, Wood and Grabski 2016).

Before approval of financial statement by the Board, Managing Director and CEO of Amcor Limited give announcement that the monetary records of the business have been correctly maintained. Even, the financial statements of the company had properly complied with relevant accounting standards as well as given a true and fair view of the financial position and presentation of the business. In addition to that, the opinion has been formed based on a sound risk management as well as internal control that had been operated in an effective way (Earley 2015). Therefore, Amcor Limited has formal as well as rigorous process that can get verified independently as well as engage in safeguarding the integrity of its corporate reporting.

At Amcor Limited, they have established policies as well as procedures so that they can ensure timely as well as balanced revelation of all the material matters on timely basis. The strategy as well as procedures takes into account Comprehensive Disclosure Policy that need recognition of matters and have material effect on the price of securities of the corporation and notifies them to the Australian Stock Exchange. Amcor Limited believes in conducting investor relations agenda that enhances two-way communication with the shareholder and allowing investors to gain greater understanding of the industry, monetary performance, governance and forecast in the most appropriate way (Fernandez-Feijoo, Romero and Ruiz 2016). Therefore, Amcor Limited makes timely as well as balanced disclosures on all the matters relating the responsible person who would anticipate having a material consequence on the price or worth of its securities.

Whistleblower Policy

Shareholders may send communications to the business or its share registry through electronic means and even given the alternative for receiving communications in an effective way. It is the Board of Directors who supports full contribution by shareholders at the time of Annual General Meeting as it ensures high level of Director Answerability. Addition to that, shareholders are appeal to vote on matters like election as well as collective payment of Directors. Therefore, Amcor Limited respects the rights of its shareholders by providing them with relevant or accurate information and facilities as it allows them to exercise those rights in an effective way.

At Amcor Limited, they understand the rigorous risk management and how it is necessary for commercial steadiness as well as for sustaining its competitive market position as well as long-term performance. There are several objectives that drive approach of this company to understand risk administration. The corporation should have a culture that is risk aware as well as maintaining by high standards of responsibility. It will even help in improving the confidence of shareholders and bring level of trust (Kend, Houghton and Jubb 2014). Therefore, Amcor Limited had established sound risk management framework as well as reviewed the effectiveness of that framework on periodical basis.

It is the responsibility of Human Resource Committee to analysis and makes suggestion to the Board on several remuneration packages and policies that is pertinent to the Managing Director and CEO. The company encourages retention of senior management by providing incentive performance schemes to them. At Amcor Limited, majority of the members are independent by nature (Marques 2018). Therefore, Amcor Limited pays their directors with sufficient remuneration so that they stay and in this way the company retains high quality directors. The company believes in motivating high quality senior executives by aligning with their interests with creation of value of security holders as a whole.

Amcor Limited is one of the Australian companies that are listed in Australian Stock Exchange. The strategy of the company is to engage in sustainability and considers it as a good practice. The company engages in providing quality products to the customer (Martínez-Ferrero and García-Sánchez 2016).

In this study, the tools that had been used to assess the risk of Amcor Limited were common size income statement and balance sheet ratios. The computation had been done as under:

Common Size Income Statement
Particulars	2013	2014	2015	2016	2017
Amount ($ mill)	Percentage	Amount ($ mill)	Percentage	Amount ($ mill)	Percentage	Amount ($ mill)	Percentage	Amount ($ mill)	Percentage
Revenue	12425	100%	10853	100%	12515	100%	12687	100%	11832	100%
Cost of revenue	10230	82%	8804	81%	9999	80%	10001	79%	9346	79%
Gross profit	2195	18%	2050	19%	2516	20%	2686	21%	2485	21%
Operating expenses
Sales, General and administrative	4013	32%	3215	30%	4005	32%	4891	39%	3898	33%
Other operating expenses	339	3%	402	4%	412	3%	12033	95%	11686	99%
Total operating expenses	4555	37%	3700	34%	4549	36%	5458	43%	4455	38%
Operating income	-2359	-19%	-1650	-15%	-2033	-16%	-2772	-22%	-1969	-17%
Interest Expense	247	2%	240	2%	256	2%	271	2%	259	2%
Other income (expense)	3403	27%	2857	26%	3456	28%	3594	28%	3224	27%
Income before income taxes	797	6%	967	9%	1167	9%	551	4%	995	8%
Provision for income taxes	168	1%	198	2%	245	2%	182	1%	197	2%
Minority interest	0	0%	0	0%	0	0%	0	0%	0	0%
Other income	-28	0%	-32	0%	-36	0%	-40	0%	-22	0%
Net income from continuing operations	628	5%	769	7%	922	7%	368	3%	798	7%
Net income from discontinuing ops	0	0%		0%		0%	-3188	-25%	111	1%
Other	-28	0%	-32	0%	-36	0%	-40	0%	-22	0%
Net income	601	5%	565	5%	886	7%	329	3%	776	7%
Net income available to common shareholders	601	5%	565	5%	886	7%	329	3%	776	7%

Common Size Balance Sheet
Assets	2013	2014	2015	2016	2017
Amount ($ mill)	Percentage	Amount ($ mill)	Percentage	Amount ($ mill)	Percentage	Amount ($ mill)	Percentage	Amount ($ mill)	Percentage
Current assets	4198	34%	3532	28%	4444	36%	7427	60%	6994	56%
Non-current assets	8224	66%	6166	50%	6685	54%	16075	129%	15922	128%
Total assets	12,421	100%	9,697	100%	11,129	100%	23,502	100%	22,916	100%
Liabilities
Current liabilities	4,701	38%	3,499	28%	4,784	39%	8,993	73%	8,824	72%
Non-current liabilities	4,020	33%	3,927	32%	4,278	35%	5,728	46%	4,216	34%
Total liabilities	8,720	71%	7,426	60%	9,063	74%	14,721	119%	13,040	106%
Stockholders’ equity	3,607	29%	2,155	17%	1,909	15%	8,781	71%	9,876	80%
Total liabilities and Equity	12,328	100%	9,581	100%	10,972	100%	23,502	100%	22,916	100%

 

Statement Showing Ratios
Particulars	Formula	2013	2014	2015	2016	2017
Balance Sheet ratio
Current Ratio	Current Assets/ liability	0.89	1.01	0.93	0.83	0.79
Debt equity ratio	Debt/ Equity	1.1145	1.8223	2.2410	0.2437	0.4269

 
From the annual report of Amcor Limited, computation had been done on the balance sheet ratios for the years 2013 to 2017. There are two ratios that had been calculation to understand the financial position of Amcor Limited. The first ratio is current ratio that helps in understanding the liquidity position of Amcor Limited for a period of 5 years. From the above calculation, it can be seen that there is constant decrease in current ratio that cannot be treated favorable condition for the company. The ideal current ratio is 2:1 and it can be seen that company was not closer to ideal ratio in these 5 years of time span. This means Amcor Limited has insufficient current ratios and faces difficult to manage daily operations as well as short-term obligations. It is recommended to the company to increase their current assets so that they can indulge in smooth functioning of business practices (Peters and Romi 2014).

External Auditor

The second ratio that had been calculated above is debt equity ratio and it is one of the solvency ratios that portray solvency position of Amcor Limited. There had been increase in debt to equity ratio from 2013, 2014 and 2015, but after that there was unbelievable decrease in this ratio by the year 2016 and 2017. This proves that Amcor Limited faces solvency issues by the end of 2017 (Baylis et al. 2017).

Conclusion

From the above analysis, it can be evaluated that Amcor Limited is a well-known packaging company based in Australia. The company complies by all 8 Corporate Governance Principles that had been explained in detailed manner. In order to understand about risk assessment, computation had been done by using Common size income statement and balance sheet ratios for Amcor Limited for the year 2013 to 2017. It had been noted that company has to maintain their current assets in their operations so that they have the ability to meet short-term obligations in the near future. Furthermore, the company needs to manage their debt by paying on timely manner.

References and Bibliography

Amcor Limited, A. 2018. Amcor Limited: Private Company Information – Bloomberg. [online] Bloomberg.com. Available at: https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=401715 [Accessed 24 Apr. 2018].

Baylis, R.M., Burnap, P., Clatworthy, M.A., Gad, M.A. and Pong, C.K., 2017. Private lenders’ demand for audit. Journal of Accounting and Economics, 64(1), pp.78-97.

Cuadrado-Ballesteros, B., Martínez-Ferrero, J. and García-Sánchez, I.M., 2017. Mitigating information asymmetry through sustainability assurance: The role of accountants and levels of assurance. International Business Review, 26(6), pp.1141-1156.

Earley, C.E., 2015. Data analytics in auditing: Opportunities and challenges. Business Horizons, 58(5), pp.493-500.

Fernandez-Feijoo, B., Romero, S. and Ruiz, S., 2016. The assurance market of sustainability reports: What do accounting firms do?. Journal of cleaner production, 139, pp.1128-1137.

Kend, M., Houghton, K.A. and Jubb, C., 2014. Competition issues in the market for audit and assurance services: are the concerns justified?. Australian Accounting Review, 24(4), pp.313-320.

Marques, R.P.F., 2018. Continuous Assurance and the Use of Technology for Business Compliance. In Encyclopedia of Information Science and Technology, Fourth Edition (pp. 820-830). IGI Global.

Martínez-Ferrero, J. and García-Sánchez, I.M., 2016. The level of sustainability assurance: The effects of brand reputation and industry specialisation of assurance providers. Journal of Business Ethics, pp.1-20.

Peters, G.F. and Romi, A.M., 2014. The association between sustainability governance characteristics and the assurance of corporate sustainability reports. Auditing: A Journal of Practice & Theory, 34(1), pp.163-198.

Schmidt, P.J., Wood, J.T. and Grabski, S.V., 2016. Business in the Cloud: Research Questions on Governance, Audit, and Assurance. Journal of Information Systems, 30(3), pp.173-189.

Vanstraelen, A. and Schelleman, C., 2017. Auditing private companies: what do we know?. Accounting and Business Research, 47(5), pp.565-584.

Vasarhelyi, M.A., Alles, M.G. and Kogan, A., 2018. Principles of analytic monitoring for continuous assurance. In Continuous Auditing: Theory and Application (pp. 191-217). Emerald Publishing Limited.