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The concept of governance is referred to as the process of governing which is being carried out bu government, market or network with the assistance of laws, norms, power as well as language (Tricker, 2015). It is associated with the process of interacting and decision making among the people involved within the collection issues that results in creation, reinforcement or reproducing of social norms as well as institutions. The present essay entails to understand the meaning and significance of internal controls, financial reporting and audit to corporate governance of public listed company (Austin, 2016). Further it makes analysis of all in terms of their importance of the organization. The organization that is being selected for the present essay is Next Plc. The company is British multinational clothing, footwear and home products retailer that has headquarter in England, UK. Firm possess approximately 700 stores out of which 502 are in UK and Ireland. Next Plc is the largest clothing retailer by sales in United Kingdom. Thus there is greater role of internal controls, financial reporting and audit to corporate governance of public listed company such as Next Plc.
Financial reporting is considered as an essential element of corporate governance. It can be defined as disclosing of financial information to the management as well as public. This is in relation with the manner in which Next Plc is performing over a particular time period. Financial reports are being issued on the basis of quarterly and annual basis (Bebbington, Unerman and O'Dwyer, 2014). There is certain purpose behind carrying out financial reporting. This includes assisting the management to involve in effective decision making relating with firm's objectives and overall strategies. With the data disclosed an insight can be drawn regarding strengths, weakness and financial health of Next Plc. Further the role of financial reporting is effective in offering crucial information regarding financial health and activities and activities of organization to its stakeholders. This includes shareholders, potential investors, consumers and government regulators. With the increasing number of scandals it has become important to gain knowledge regarding the role of corporate governance in the process of financial reporting. There are certain professional organizations such as conference board, NYSE who has issued standards and guidelines relating with corporate governance in order to build the trust of public within organization (Boussebaa, 2015). Just complying with such measures might not be enough in building confidence among the investors. Thus it becomes important for Next plc to bring improvement bin their structure of corporate governance. Financial reporting is governed by the means of common and statutory law. Further it needs to be done in accordance with the ethical standards. It has been examined that in certain cases financial reporting falls short of both ethical and legal standards. The requirement for accounting and financial reporting change due to reasons such as Scandals and complexity that reflects ineffective in governance by the organization.
The concept of audit is referred to as the examination as well as verification of the books of accounts of the organization like Next Plc in systematic manner. It also includes analysis of the transaction records and other relevant documents by the qualified accountant. Such is in order to reveal that whether the business has presented its financial statement in true and fair manner or not (Veldman and Willmott, 2016). It attempts to makes sure that books of accounts are maintained in proper way or not. With audits third part can be offered with assurance that several stakeholders which are subject matter are free from any sort of material misstatement. The role of financial audits is being carried out for the purpose of ascertaining validity as well as reliability of the information. Further it offers assessment regarding internal control of system. This assist in representing the extent to which the organization possess the quality of corporate governance. The term corporate governance can be referred to as the oversight of business policies, procedures and practices. Such acts as an aid in ensuring that firm is operating in the best interests of the corporation and its shareholders (Soin and Collier, 2013). The firm like Next Plc employs auditors staff for the purpose of testing and monitoring internal controls. One of the most essential task relating with internal auditor is the detection of fraud. This is because it can result in causing loss to firm and can influence the image of the company to a greater extent.
Another major aspect relates with internal control. It is referred as the procedure of assuring the achievements of the business objectives within operational effectiveness as well as efficiency (Carnegie and O’Connell, 2014). Further it also includes reliability of financial reporting and compliance with laws, policies and regulations. It has been assessed that internal control is the technique that is put in place by the firm in order to ensure the integrity of financial and accounting information. This is in order to meet operational as well as profitability targets and transmit policies of management throughout the business. There is greater role of internal control in the corporate governance systems. With control business can make preparation of accurate and complete financial statements at the last of every month (Westphal and Zajac, 2013). Through the implementation of functional control business can hedge, protect against the operating risk. Such risk can relate with the manufacturing activities as well as technological processes of Next Plc.
It has been assessed that the concept of governance relates with establishing the policies and monitoring their implementation by the governing body members existing within the firm such as Next Plc. It involves the mechanism that is needed for balancing the powers of the members. In addition to this their primary duty relates with being improvement in the prosperity and viability of the enterprise to a greater extent (Owen, 2013). It has been examined that governance is regarded as the decision making process and the procedure through which it is being applied. Analysis of governance pay attention towards informal and formal parties involved in decision making and implementing the decisions that have been developed. Government is considered one of the important actors in the corporate governance. Other parties that are engaged within government may vary to a significant level. In case of rural areas the actors includes influential landlords, association of peasant farmers, NGOs, cooperatives, research institutes, political parties, finance institution as well as military etc. However in situation of urban areas the condition is more complex. Sound governance possess several characteristics (Nini, Smith and Sufi, 2012). This includes accountable, consensus oriented, participatory, transparent, responsive, follows the rule of law as well as equitable. Corporate governance is the manner in which organization policies itself. In other words it is regarded as the technique of governing the organization such as sovereign state, instating its own customs, policies as well as laws to the employees from the highest to lowest level. Governance has greater importance in increasing the accountability of the organization and avoid massive disasters before they emerge.
There is presence of several principles that are attached with corporate governance. These are in relation with recognition of shareholder. This is regarded as key principle that assists in maintaining the stock price of the organization. Effectiveness in corporate governance makes sure that all the shareholders gain voice at general meeting and are allowed to participate. Another major principle relates with interest of the stakeholder. Such is being recognized with the assistance of corporate governance. Further in order to ensure good governance there is greater importance towards outlining the responsibilities of the board (Nahar, Jubb and Azim, 2016). It is important to demonstrate the duty of the board in an effective manner. The entire board share similar vision in relation to the organization for future course of time. Sound corporate governance includes factors such as ethical behavior. It is important to develop code of conduct in relation to ethical decision for all the members of the board. Underpaying as well as abusing the employees who have been outsourced results in affecting the organization to a greater extent. Transparency within the firm is the key for promoting shareholders trust. Financial records, earning reports as and guidance needs to be stated with clarity (Clatworthy and Peel, 2013). There is huge significance of governance to the organization like Next Plc. In situation when it is being implemented with effectiveness it results in preventing corporate scandals, fraud, civil as well as criminal liability of the firm. It also lead to enhancing the brand image of the company before the public. A firm without presence of corporate government is considered as the body without soul or conscience. There is significance of corporate governance is keeping the firm honest and free from trouble. This results in increasing the efficiency of the business to significant level. Along with this it helps in increasing the goodwill of the firm to a greater extent. This affects the brand image of the business in the market place.
Good governance is important due to reason that it lies at the heart of the successful firm as well as institution. Further with the assistance of sound governance the firm is protected against poor decisions as well as exposure to dangerous risks (Montesinos and Vela, 2013). Importance of good governance can be viewed towards transforming the business performance such as Next Plc from to to bottom. However there is presence of several organizations who have ignored the importance of good governance and due to this they have to make payment of price for their failure. This has resulted in affecting the goodwill of the company to a greater extent. Further this has affected the trust of the society in the organization. It has been examined that poor governance can lead to exposure of individual board members, chief executives, other directors as well as company secretaries to the threat of loss of reputation as well as personal liability (Evans, Juchau and Wilson, 2014). Poor governance can resulted in adversely affecting the existence of the business in future course of time. In the present era, there is presence of higher allegations in relation with corporate misconduct, fraud as well as bribery. Thus corporate accountability has become major high profile issue. Due to presence of such the role of corporate governance has increase significantly. This is effective in improving the work processes within Next Plc. Moreover it acts as an aid in improving the image of the company in the market for long run. Further it assist in enhancing the survival of the company in the market for greater amount of time. It is essential that good governance possess fair legal frameworks that can be enforced impartially. This need protection of the human right in complete manner. Impartial enforcement of the law need an independent judiciary as well as an incorruptible police force (Larcker and Tayan, 2015). There is greater need the sound governance has to possess institutions as well as processes that can effectively serve the shareholders within reasonable time frame. Good governance is considered as the process as well as institution that acts as an aid in meeting the needs of the society while making sound usage of the resources to a greater extent.
It can be concluded from the essay that there is huge importance of internal controls, financial reporting and audit to corporate governance of public listed company such as Next Plc. In addition to this it is significant for the company to demonstrate transparency in financial records so as to ensure effectiveness within business operations. This would assist the firm in disclosing different aspects relating with accounting before the stakeholders in an effective manner. Along with this the role of corporate governance is important in reducing the number of defaults within the organization. As such it has greater impact on the goodwill of the business. It has been inferred from the essay that sound corporate governance includes factors such as ethical behavior. It is important to develop code of conduct in relation to ethical decision for all the members of the board.
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