Why all directors should be shareholders in the company: the case against "independence"

It is argued that the shift towards more 'independent' directors, in the wake of corporate collapses, is a fundamentally bad move, undermining the rights and powers of minority shareholders - entrenches a second-rate corporate governance model, separation of ownership and control, in company law - rather than suggest cosmetic reform in an attempt to address the problem, it is proposed that all directors must have significant interest in the company they serve - directors' self-interests and the best interests of the company become intertwined - this is a more effective way of tackling the problem of separation of ownership and control

East Timorese history after independence

This paper examines recent debates over national history in post-colonial East Timor. It is argued that beneath a broadly unifying theme of ‘national’ resistance to colonial occupations lies a more complex and ongoing postcolonial struggle over the ownership of core historical narratives, identities and symbols.

The market for financial report audits : regulation of and competition for auditor independence

The independence of auditors and the quality of financial report audits generally are rarely tested except in circumstances of corporate failure when alleged sub-optimality is present. Often auditors have good defences as to their expertise or competency, but rarely do they have equally convincing defences for the independence of their audit. A major issue for the regulation of auditor independence is that the threats to independence are often subtle and difficult to measure. This paper argues that firms undertaking financial report audits need to be transparent and competitive in respect of auditor independence. Two models that adopt this premise are proposed.

Auditor independence: regulation, oversight and inspection

Much of what auditors do is unobservable. Indeed, what goes on in an audit has been described as ‘secret audit business’. Audits in this context are of financial reports and those financial reports are the representations of the management of those companies, not the auditors. The audits of financial reports are of value in that they provide a competent and independent (of auditee management) attestation of the validity of those management representations. This attestation lowers the ‘information risk’ for the users of these financial reports. There has been a marked increase in activity to regulate matters relating to independence. The proposals outlined in CLERP 9 are one example of this. The requirements in the United States under the Sarbanes-Oxley Act are a further example.

Audit firms operate in a highly regulated yet highly competitive market. Evidence exists to suggest that audit firms are active competitors in respect of audit pricing and competency, including specialist industry expertise. Until recently, there has been little or no observable evidence that audit firms compete in respect of independence. The issues as they relate to audit independence are complex. One issue is that threats to independence are frequently subtle and difficult to observe and measure. Hence, controlling the decisions that relate to them cannot rely solely on regulation which itself inevitably relies on crude definitions and imprecise measures. Additionally, further regulation may not achieve the desired end without other processes being but in place in tandem.

This paper argues that:

1. auditors of certain classes of companies (in particular, those that are publicly traded) should be provided with incentives or requirements to have observable processes on independence
2. the means of observability should be in the form of an inspection and review process focussing on issues critical to the audit, such as independence
3. expert persons not having a current or past financial interest in the firm or in the commercial outcomes of the review should be used in the inspection and review process
4. the review process should have wide-ranging powers of inspection to examine the policies, processes, structures and ‘culture’ of audit firms
5. the report of the inspection and review should be made public, unedited and in full, and in a timely fashion. The primary objectives of this proposal are to (1) make more transparent to the market for information the characteristics of the audit firms and their process to ensure audit independence, and (2) provide a rigorous oversight of independence decision-making by persons who have no commercial interest in the outcome of the decision.

Auditor independence and the nexus with corporate governance-quo vadis?

"Where were the auditors?" Yet again, the independence of the auditor has come under close, critical scrutiny with ongoing collapses of large listed companies, which have global implications for the proper functioning of investment markets. The most recent collapse being that of ENRON in the United States of America, (USA).

"Who are the auditors?" The nexus of auditor independence with corporate governance is examined drawing on Foucault's notion of the relationships between power I knowledge and ethics in the construction of ethical identity. In the face of declining public confidence and demands for more stringent regulation, the tensions between greater self-regulation of auditors by the accounting profession and moves by governments to impose more stringent legislation I regulation, including the creation of public oversight bodies is apparent. This paper presents a comparative analysis of recent developments internationally, with particular reference to South Africa and Australia, intended to more rigorously enforce auditor independence and improve corporate governance. Five key areas identified by various Commissions and regulatory bodies that are regarded as posing significant threats to auditor independence are highlighted. Recommendations for changes to independence requirements in professional codes of ethics and corporate legislation, intended to safeguard auditor independence and to enhance investor protection, are critically examined. It is argued that the "new" independence recommendations while providing more detailed guidance for dealing with the independence threats fail to introduce any new concepts and may be found as ineffective as the plethora of earlier regulations. (This paper represents work in progress, which is intended to spark debate, and accordingly, the authors invite comment from readers to develop further aspects of research into this critical area).

East Timor : beyond independence

The chapters in this book examine the major themes of development, borders and security, politics and justice, resource and land management, education, and language policy. Though the country was initially lauded as a case study in successful state-building, the crisis of 2006 demonstrated that East Timor had more in common with other post-colonial, post-conflict societies than some of thse earlier optimistic assessments suggested. East Timor continues to attract the interest and attention of governments, scholars, development institutions and aid workers as a society rebuilding itself after almost a quarter of a century of profound trauma, and the consecutive eras of colonialism. Covering the era from the independence referendum in August 1999 to the political crisis in 2006, and future prospects and challenges, this book is an invaluable resource for understanding the challenges facing the first new nation of the 21st century.

An exploratory study on internal audit independence in Australia

This study draws on agency and institutional theory to examine the issue of internal audit’s independence through its relationship with components of corporate governance.

The internal audit function is actively considered as one of the four components of corporate governance, along with the board, management and external auditors. It serves this purpose by providing a range of services in its capacity of monitoring and consulting which is actively sought by the other components of corporate governance to satisfy their extended accountability requirements. The integrity of these services is, however, only assured if internal audit maintains its independent status. As such there is a “tension” resulting from the pressure to provide these value added services as perceived by the parties involved and maintaining its independence status.

Based on an extended survey with organisations in the Australian corporate sector, this study critically examines the results of the survey against existing literature and best practice guidelines to determine if internal audit functions operating under this tense environment are operating independently.

The results indicate an interesting analysis. While it indicates a somewhat trend in complying with best practice guidelines for maintaining independence, it also indicates that this is not consistently adhered to as organisations are able to operate in an environment that compromises internal audit independence. A main reason for this appears to be a mix of internal audit structural set ups brought about by a lack of statutory backing to provide for consistency in implementation of best practice guidelines for maintaining independence. This is exacerbated by internal audit being viewed as partner by these parties thus widening the “tension” gap between its advisory role and its independent status. A wider question emerges which questions the ability to maintain this independence concept under a partnership management environment. The concept of internal audit being an independent function as promulgated by the Institute of Internal Auditors through its definition of internal audit is seriously questioned under the totality of this environment.

Assisting independence with "the latest and greatest" of technologies

A case study of a long term wheelchair user: This presentation will highlight the difficulties associated with matching client's environmental access, seating and mobility needs using multi-functional systems, which also happen to be the "latest and greatest" technologies. The paper addresses the issues experienced by these clinicians when prescribing systems with minimal trial history (due to their newness) and the compatibility issues encountered by the supplier when matching the new with the old of the current powered wheelchair for a particularly motivated wheelchair user.