Evaluation of Code of Ethics and Analysis on Independent Directors

Question: Describe about the Evaluation of Code of Ethics and Analysis on Independent Directors . Answer: 1: The following set of evaluations focuses upon alleviating the ethical dilemma arising as a result of approaches made by the CEO of CCCL in order to manipulates the auditing report prepared for the holding company for the personal gains of the management of CCCL including the CEO. Moreover, the evaluations have been made using several ethical principles in addition to different set of moral principles to bring out the level of deviations from the ethical guidelines mentioned in the handbooks of ethics and good corporate governance. American Accounting Association Model Decision Making Process Evaluating the facts in this case The fact of the case are that Belinda Battersby has been approached by the CEO of Complete Cancer Care Limited (CCCL) to provide a falsifying report that two linear accelerators are fit for use in radiography tests. Moreover, CEO Adam Chase also indicated that Battersby and Associates has a probability of getting the auditing contract of CCCL next year in order in return for falsifying the audit report of linear accelerator. Ethical Issues pertaining to the case In case Belinda agrees to produce a false report on the functionality of the linear accelerator the health risks of radiation from x-ray emitting from the accidents rises on the patients undergoing ontological treatment at the hospital increases. Rules and values enumerated in the Code of Ethics The professional values that are enumerated in different levels of code of ethics with regard to auditing and assurance services are maintained through the application of moral and ethical principles in the execution of investigation and examination. The ethical codes are a measure and code of professional conduct that focuses on attaining the level of professional excellence in pursuit of the highest standards in execution of auditory services. In term of manipulation of auditory report, in order to benefit one party at the cost of other stakeholder, can have multidimensional impact upon the level of corporate operations along with the impact upon all the users of services that are based upon the auditors report. The level of expertise maintained by the auditors based upon which the numerous stakeholder tend to carry on their decision making activities also brings forth the level of risks inculcated through bad advice both to the management and that of the stakeholders. The primary task to alleviate ethical dilemmas as regards to the auditing reports and evaluation comprises of identification of ethical threats that may occur at different stages if auditing process. In the present case the ethical dilemma lies between the level of incentive that the auditor shall receive next year in turn for the manipulations of audit report to showcase the ability of the radiography accelerator to conduct proper treatment of cancer patients. Alternative courses of action The alternative courses of actions that occur in the present case can be attributed to showcasing the level of unethical practices that are conducted through different forms of unethical incentives. The monetary incentive behind the unethical behavior of CEO of CCCL can have long term repercussions of adverse medical nature. The compliance with the concept of ethical prudence also takes into account the auditing guidelines relating to audit of medical facilities and operations along with issues regarding the medical equipments. The present case brings forth a situation whereby the degree of misinformed judgments brought forth by the false audit reports can lead to detrimental Comparison between alternative and ethical values The dilemma with regards to the level of manipulation of accounting and auditing services in return for financial and economical incentives can be inferred to have adverse impact upon the well being of the prospective stakeholder in the cancer treatments at CCCL. Evaluating the probable consequences The probable consequences of the misguided and self inflicted ethical dilemma may lead to loss of human lives along with severely affecting the level of care that could have been provided through use of judicious and ethical measures in presentation of reports. The limits as regards to the fall out of the linear accelerator causing radiations an effects the further repercussions of the level of enhancements as regards to the following side effects of radioactive elements. Decision making as regards to the issue Belinda Battersby needs to consider the consequences of her designs and that of her firm to provide a falsifying report of the present conditions of the linear accelerator. Well founded ethical code of conduct that sets forth amount of deviation of the unbiased audit report as compared to that of the falsification of the functionality report with regard to the accelerators presented at CCCL. Barnsby shall reject the unethical practices conducted by the CEO and follow ethical guidelines enumerated in the models relating to moral dilemmas Rezaee Et al, I2015). With regards to ethical dilemma faced by the auditor in deciding whether to refrain from activities that results in financial gains or to indulge in them at the costs of risking the lives of the Cancer patients about to get treatment at CCCL. Table 1: Showcasing the level of deviation from ethical principles that is proposed by the CEO through offering of non monetary incentives (Source: As created by the author) 2: Introduction: The role of independent directors comprises of overseeing the different set of management decisions taken over by the board and put forth suggestive measures in order to rectify or enhance the management decision making process. The principle role of independent directors pertains to advising the executive board member in an attempt to safeguard the interests of the shareholders. The limited authority of an independent director restricts any attempts of detecting fraudulent activities and corporate malpractices in the organization. However, despite limitations the independent directors can still run through internal management report and review the discrepancies found in such reports. With regards to the corporate operations specified as regards to the company the presence of extended level of authority to the independent directors ensures a enhanced quantum of adherence to corporate regulations. Current recommendations towards inclusion of Independent Directors: The occurrence of numerous corporate scandals has resulted largely from unethical practices followed by the executive board members. Jones Welsh (2012) states that advent of numerous corporate governance issues has impacted the investors confidence adversely. Therefore it is imperative to take into account the limitations pertaining to the functions of independent directors and broaden their purview in order to mitigate the risks of principal-agent conflicts. Moreover, Masulis, Wang Xie (2012) mentions that corporate firms should consider inclusion of independent directors that have relevant experience in terms of overseeing multinational ventures. In terms of policy formulations by the regulators, the role of independent business directors remains ambiguous. The role of independent directors is suggested to be extended to include the different sets of audit and accounting verification, evaluation of the level of counter measures undertaken by the management boards to prevent adequ ate adherence to the regulatory guidelines as regards to the level of corporate operations (Masulis, Wang Xie, 2012). The level of manipulation made by managerial personnel at different levels of operations may in turn be compensated by the strict vigilance of an unbiased overseer of the whole company operations. In order to minimize the level of fraudulent activities it is suggest enhancing the examining and supervising authority of the non executive directors (Ahmed Henry, 2012). The probability of fraudulent activities decreases as regards to the level of unethical and unlawful activities. Moreover, as far as the issues regarding investors confidence along with the future prospects of the company are concerned, it may experience a positive response. In terms of strategic planning the non executive and independent directors can provide beneficial advise as well guiding in the formulations of different for market analysis framework. Through active participation in day to day acti vities of the company and by providing separate evaluation report of managerial performance to the financial regulators the independent directors can increase the accountability of management. Evaluations of necessities for independent directors: Previous track records of corporate malpractices showcase the fact that regulation of adverse agency costs are imperative in order to restore corporate governance measures. In order to reduce the disparity between the interests of the shareholders and that of the key managerial personnel it becomes imperative to include independent directors into managerial decision making (Ahmed Henry, 2012). Corporate regulators preference for expanding purview of independent directors, in terms of participation in different sets of committees to oversee timely compliance to auditing standards, is justifiable in order to inculcate good corporate governance practices. Moreover, Masulis, Wang Xie (2012) mentions that inclusion of independent directors into the board would result in heightened level of strategy development along with policy reforms in terms of operations, management of finances and restriction of unjust level of compensations offered to the key managers and directors. Further, Hopt (2013) states that monitoring of financial performance and vigilance upon corporate policies is material factors in context of corporate governance. In order to collect corporate information more reliably and dissemination of that information to the numerous investors and stakeholders of the company the presence of independent directors in the management decision making is crucial (Knyazeva, Knyazeva Masulis, 2013). The independent director has the ability inculcated to supplement shareholders with critical evaluation of managerial and non managerial personnel. Butler (2012) mentions in this context that the amount of regulation that is imposed upon Australian Firms in regards to the misstatements and window dressing of income statement and balance sheet ion due to certain internal factors. The governance and regulations pertaining to the level of corporate integrity cannot fulfill its desired objectives without the assistance of an independent director to see through that the corp orations and the board of directors adheres to such guidelines. Evaluation of factors that impede the effectiveness of independent directors: Ahmed Henry (2012) mentions that lack of conducive environment for the functioning of an independent directors results towards decrease in levels of productivity and contributions made by such directors. Moreover, in the view of Chan, Watson Woodliff (2014), the factors relating to information asymmetries results in disadvantageous situations for the independent directors as they are devoid of material financial and non financial information. Further, as preparation of managerial and financial reports comes under purview on executive board members, the probability regarding manipulations of financial and non financial data increases. Tower Rusmin (2012) states that dependency of non executive and independent directors on the manipulated financial statement and audit reports for drawing conclusions, severely impairs their judgments. In terms of communication between lower level employees and that of managerial personnel the feedback cannot be analyzed on a consistent basis therefor e resulting in a limit upon the evaluation of productivity and potential alleviation of management crisis. Recommendations Restructuring of power arrangement at the directorship level can reduce the amount of biasness in board decision making. Further, through inculcating a sense of collective responsibility among the executive and independent directors both the financial and non financial decision making process can be streamlined. It terms of mitigating risks pertaining to bankruptcy of the company or in regards to the lesser adherence of regulations leading to manipulation of financial figures, providing higher levels of authority to independent directors may prove beneficial. Moreover, the presence of independent directors in the board as trustee of the stakeholders may result in the prevention of accounting and management frauds along with a tight regulation on irrational compensation offered to the key managerial personnel and executive directors. Further, the overall integrity of the firm increases exponentially with presence of good corporate governance and on the other hand good corporate practi ces in turn is dependent upon the presence of unbiased overseer such as an independent director. Conclusion: The above report showcased the significance of independent directors as regards to the level of regulations and supervisory activities that can be undertaken by such directors with the assistance and backing of regulators and shareholders. 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