History Of The Stewardship Theory Accounting Essay

account Of The Stewardship Theory Accounting EssayThe stewardship surmisal holds a protestent uprise from that of the way of life conjecture, it first premise is that, the phoner serves a large direct of social purposes rather than just trying to maximize the wealth of shargonholders. The stewardship speculation a want c in alled the stakeholders theory assumes that corporations are social entities that affect stakeholders welfare and stakeholders are individuals interacting with the firms instanter, accordingly, they nates affect or affected by the achievement of the firms objectives(Donaldson and preston,1995, freeman,1984) gibe to Starik and Rands(1995), a phoners success can be judge by its king to add stakeholders value(starik and rands,1995,Dunphy et al,2003).stakeholders go away only if return to a firm for to a greater extent when they always get what they wantFreeman,1984, freeman and Mc Vea,2001).Hence stakeholders are heared as subservient to bodily suc cess and they tend to possess or so moral and lawful rights(Donaldson and Preston,1995, Ulrich,2008).Companies knowment support to take in to consideration the claims or link up of stakeholders in their determination do run(Blair, 1995), stakeholders participation in the corporations decision do process enhance better efficiency (Turnbull,1994) and also reduces conflicts(Rothman and friedman, 2001).A conjunction can work two approaches when considering or integration stakeholders in their decision qualification (kaptein and van Tulder,2003). These two approaches are reactive and proactive approach. thermolabile approach on one hand is when the concern of stakeholders are non considered or mingled in making corpo prise decision. This usually leads to misalignment of the companys objectives and the demands of stakeholders (Mackenzie,2007).The scandals of ball com was attri plainlyed to the fact that they never integrated the stakeholder concern in their decision makin g processes(Curral and Epstem,2003, Turnbull,2002, walkins,2003 and Zandstra,2002) .In respond to these scandals, some regulations were chastise up by governments with the aim of align stakeholders interest with bodily objectives. For instance, the Sarbanes-Oxley Act. On the different hand, the proactive approach is when companies integrate the concern of stakeholders in their corporate decision making process, thus establishes a hefty corporate system structure( de wit et al, 2006).3.5 Summary of the theories.The knowledge of agency theory can be recogniseed to Coase (1937) besides the ideas of this theory was mulish only to directors and placards since the 1980s.Following . agency theory, individuals are self-interested and not altruistic, therefore individuals can never be trusted to always act in others kayoedmatch interest. On the other hand,, individuals testament always want to maximize their utilities functions, the agency theory considered handlers and donati onholders relationship as a contract ( Adams, 2002). This means that managers actions must be properly monitored to guarantee that they always act in shareholders best interest.The stewardship theory on its part opted that companys age of directors and their CEO, acting as stewards, are boost to act in the companys best interests and not trying to satisfy their selfish interests. This is partly because, previously senior exe sliceives regarded companies as an extension of themselves (Clarke, 2004 Wheelen Hunger, 2002).The stewardship theory therefore suggested that,like shareholders, protrudestrip management of a company should care to a greater extent on the future success of the company (Mallin, 2004).3.6 The blow of Audit committeeThe AC is seen to deplete great encroachments in attempt to ensure considerably corporate ecesis. These impacts can be seen on scrutinise process and scrutinize fees3.6.1 The impact of AC on Audit processIt has been acknowledge that AC has a pertinent fibre to play in verifying and protecting the single of the companys financial statement and the company home(a) fit systems (Abbott et al, 2004 klein, 2003 Australian accountancy inquiry foundation et al, 2001).Included in this bureau, the AC has the responsibility of guaranteeing the independence and competence of taboodoor(a) take stockors(ASX, 2003Australian accounting enquiry foundation, 2001). consort to Sabones-Oxley act, the AC has the responsibility to commit examineors and they come to oversees the surgical procedure of the auditors regarding the firms external financial historying(US congress, 2002)It was argued by smith report (2003) that AC pick up to review the engagement memo at the lolly of audit and the AC has to take in to consideration the audit stove and the suitability of the crap that is planed.Furthermore, according to smith report,(2003) ,at the end of the audit work, the AC have to treasure the the audit findings and managemen t opinions regarding the auditors recommendations. As a recommendation, AC has to meet with external auditors at least(prenominal) on a yealy innovation in the absence of the management to deliberate on issues arising fro the audit (smith report, 2003, Australian accounting and research foundation et al, 2001).Some research has been carried go forth to model auditors view regarding the impact of AC on audit. Cohen et al,(2002) carried forth a organise consultation sampling the opinions of auditors. It was revealed that AC has a less evidentiary role to play on audit process compared to senior management or the batting order. In this interview, the auditors specified that they only met with AC 2 to 3 measure a year and in these group meetings, the AC plays a passive role rather than acting proactive as the auditors tends to be reporting to the AC. notwithstanding, deliberations with AC are reported to have significant impact on the audit risk discernment and audit setti ng(cohen et al, 2002).Another key area where AC has a pertinent role to play in audit process is to resolve conflicts between the management and the auditors(cohen et al,2002, Turley and Zaman, 2004).As revealed by beattie et al (2000), AC seems to ebb the confrontational strength of interaction between the auditors and management by increase the level of news and reducing the need for negotiation(Beattie et al (2000).On the other hand, some studies like Dezoort et al,2003Dezoort and salterio, 2001and knapp,1987) observed influential factors on the AC decisions to support auditors in steads of the management. Such factors include, AC members expertise and experiences, the nature of the conflict, the auditors perseverance and clients financial situation.3.6.2 The impact of AC on Audit feesA good number of studies have found out that there is a link between audit fees and the AC.( Goodwin-stewart and kent, 2006 sharma, 2003).This is seen on the AC role of guaranteeing that audit hou rs are not cut down to a level that go forth compromise audit quality(Cadbury committee, 1992,jack, 1993).According to smith report(2003), in situations where the AC is not contented with the audit scope, more work or task has to be beged. Also, the AC have to be genial that the audit fee is appropriate and that efficient and effective auditing performance get out be achieved for the fees charged. As a consequent, incase the AC fails to carry out their responsibilities properly, they will lose their status or reputation and will panorama litigation when there is audit failure(Abbott et al, 2003). in that locationfore, the AC have high school incentives to request for good auditing quality.Chapter 44.1 bodied Governance issues in Developing Countries (Cameroon)According to Wallace (1990), resurrecting countries are defined as those countries found in mid-stream of victimisation and are referred to anamorphous and heterogeneous group of countries found mostly in Africa ,Asia, Latin America ,Middle East and Oceanea. There exist difference between real and developing countries in terms of culture, politics and commercialize frugals (Waweru and Uliana,2005).Due to insufficiency in skilled human resources, developing countries therefore find it awkward to attract personnels verse with accounting and financial skills in their committees. The cultural chance variable between highly individualistic countries ( like North America) and highly collectivised countries (like Africa) necessitate different corporate governance arrangements. Rabelo and Vasconcelos (2002) pointed out factors like economic trends towards globalization, under highly- genuine capital marketplace as come up as government intervention has make the model of corporate governance to differ from those in European countries and North America. Mensah (2002) argued that countries in Africa are not well equipped in implementing the kind of corporate governance found in the western world be cause of the economic and political regimes characterizing these countries(example fainthearted fraudulent heavy and judicial regimes ,state ownership of companies as well particular(a) capacity in skilled human resources.).Corporate governance structures in less develop countries are determined by the zeal to maintain control by the majority shareholders over firms ,the dependent on debt finance, weak financial markets and unproductive wakeless system (Rabelo and Vasconcelos,2002).Developing countries are always confronted with problems like less developed and illiquid capital markets, economic uncertainties ,investors protection as well as weak legal and judicial control system (T uniformnyi et al,2007).According to Goddard and Masters(2000),audit committees has become more relevant and prevalent latterly but however there is famine in the empirical research or so their value. Kalbers and fogarty(1993) further indicated that the issue of whether audit committees are really discharging their relevance responsibility remain in fitly understood, suggesting therefore the need to examine the ways audit committees are operating in developing countries like CameroonIn Cameroon, most companies are owned by institutions and such institutions are owned by the state(government), therefore most board members are serving the position as management of shareholders not because of their energy neither their experiences(Mensah,2002).Audit committees operations in developing countries are different compared with the practices in developed countries .In 2001,the Cameroon capital market authority gave signposts regarding corporate governance activities for listed companies.one of this guideline was that which called all boards to form audit committees comprising at least three mugwump non-executive directors.Figure 2, corporate governance(CG) fram work in Cameroon4.2 The legal and Regulatory modelling of corporate governance for listed companies in CameroonCameroon op erates under two systems of laws videlicet the viridity law and the civil law. The bilingual nature of Cameroon is inherited from Britain and France when the county came under the giving medication of these two great big businessmans. Therefore Cameroon has a bijural system with the English customary Law effective in the two Anglophone provinces of North West and southwest West and the French Civil Law effective in the octad francophone provinces that is to say Adamaoua, Centre, East, Far North, Littoral, North, West and South.The surveillance of the principles of good corporate governance in Cameroon listed companies have been protected by the mixture of voluntary and authorization mechanisms .The DSX figure of best practices for listed companies in Cameroon is voluntary and is aim at enhancing good business practices and standard for all listed companies in Cameroon. On the other hand, required corporate governance requirements linked to companies are enclosed in the C ompanies and affiliate Matters Act 2001).(CAMA).The following bodies are loaded with the responsibilities of guaranteeing effective management, accountability and control of companies in Cameroon.it is important to deliberate on the remarkive roles and responsibilities of these institutions .4.2.1 The Douala Stock Exchange(DSX)The DSX is the top regulatory organ of stock market in Cameroon. DSX was formed , and unionised in agreement with the provisions of degree No.99/015 of the 22nd December, 1999.but it went effective from 2001. The DSX is both a standard bearer of the national economic and the financial familiarity .It is a public limited company with board of directors. DSX has a resume capital of 1.8 billions CFA of which 7% is owned by private commercial banks , credit foncier of Cameroon and the Dutch bank FMO, 23% by public interest and 13.3% by private insurance companies. In Cameroon, the number of companies listed in the Stock market is very insignificant. There are only three companies listed in the DSX namely the mineral water company(SEMC), the African society of Agriculture and forest Cameroon(SAFACAM) and the Cameroon cabaret of palms(SOCAPALM),DSX got as it main objective the promotion of active stock market by creating a conductive investment environment to encourage contrary investors to invest in Cameroon. To ensure appropriate standards of conduct and expertise in security business, one of the main functions of DSX is to ensure total protection of securities, the registering of all security merchants, investment consultants and physical market like the stock convince trading floors or branches.In custody of its mandate of spreading good corporate governance, the DSX positioned the code of best practices for companies listed in Cameroon. The aim of this code was to render sure that managers and companies shareholders perform their provinces within the context of accountability and transparency. This code of best practices focuse s more on the board of directors, the audit committee and the shareholders.4.2.2 The Board Of Directors ( BODs)The code of best practices focuses more on the board responsibilities and their functions. The board have the obligation of directing the activities of the company in a legal and efficient behavior as well as ensuring that the company progresses in its value basis process. According to the code, the main functions of the board are strategic preparation, selection, performance assessment and compensation of senior executives. communiqu with shareholders, guaranteeing the truthfulness of financial control and report and also guarantee that ethical business standards are upheld and that the company is in accord with Cameroon laws .The code endorses the board surface of close to 15 members and a least 5 members made up of both executive and non-executives directors.4.2.3 The Audit military commission (AC)The DSX code of best practices identify the importance of audit comm ittee out-of-pocket to its strategic position in guaranteeing good corporate governance standards in companies. The recommendations of audit committee are an addition to the provisions of CAMA. The main duties of audit committee can be summaries as listed below To determine if the company accounting and reporting policies are in abidance with the legal requirements and in accordance with ethical business practices Reviewing the scope and the preparation of audit requirements-Ensure the durability of the companys accounting system and upcountry control-Make approval to the board concerning the appointment, release and compensation of the companys external auditors-Approve the internal auditors to conduct investigations on activities which are of found interest to the committee-the appraisal of the integrity of the firms financial statements-To counsel the board on the trustworthiness of financial and maybe other informations that has to be promulgated in the name of the board-T o finagle the financial reporting and divine revelation procedures-The deliberation on the nature and scope of the audit with the external auditors-To evaluate the management memo from the external auditor-To ensure the effectiveness of the internal control operations of the firm To evaluate any substantial findings of internal investigations4.2.4. The ShareholdersThe DSX code of best practices for corporate governance in Cameroon made a series of recommendations to ease shareholders piece at the ordinary meeting. In respect of this, the place for the general meeting has to be such that it is conceivable and affordable in both cost and distance, to allow a mainstream of shareholders to be pre move in the meeting and to vote, thus avoiding the violation of shareholders right. The code also necessitates that sufficient notice of such meetings should be made available to shareholders and these meeting notices should upset the shareholders a least 21 working long time before the meeting day. The notice must contain informations on the annual reports , financial statements and other relevant information to allow them to vote appropriately on these issues. The general meeting is like a venue for the companys board to communicate and boosts shareholders contribution in the companys governance4.2.5 The GovernmentThe role of Cameroon government is not unexpended out in ensuring good corporate governance practices. The government offers the legal frameworks for firms incorporation, outline the limits of business activities, the government ensures that the companys operations are in compliance with formed standards and that stakeholders obligations are met. The basic principles which are entrenched in the summit regarding the management and control of business corporations in Cameroon include-The acknowledgment of company as a legal entity different from its owners.-Infinite life of a company due to shares transferability-The designated board supervises the runn ing of the company and is answerable to the all members on their stewardship.-The directors has the obligations of keeping good records of the financial issues of the company and make proper returns.There are three main legal form for doing business in Cameroon that is, an individual functioning as a sole owner without formality, a partnership of a least two persons and the worldly concern of a limited liability company recorded under CAMA. The CAMA gives a lot of tasks to the board members to direct the companys activities effectively to guarantee business accountability, transparency and responsible to firms owners and stakeholders.4.3 The Actors of Corporate governance Managers and shareholdersIn Cameroon, there is a cumulative rise of the point of what companies owners will become as they are simply the viewers on the management of their money by managers. To answers this headspring, we have to look at Managers behaviors, however Managers behaviors varies depending on shareho lders influential abilities. Managers behaviors defined the importance of Corporate governance in companies due to the critical position they wage in the value creation process (Caby and Hirigoyen,2001) and also due to the detachment of ownership and decision making functions. Managers as shareholders agent have as their key objective to manage the business at shareholders best interest(Ross,1973 and Jensen and meckling,1976) but however both the manager and firms owners has varied utility functions and each tries to maximize its utility function(Ross,1973).Agency conflicts or problems can then result from managers opportunistic behaviors .For instances, managers are much motivated in seeking companys growth because their salary depends on it .(Baker ,Jensen and Murphy,19958),Also there is the issue of diversification that managers are always interested on .Managers can have the will to diversify risk but it will contradict shareholders interest (Aminud, and Lev,1981).Managers occ upy a pivotal position in a company as they represent shareholders and act as the employees superior authority their arbitrations are difficult(Arcinles,1995).Corporate governance role is then to aligned managers attitudes near shareholders and stakeholder wealth maximization criteria. However , the extend to which corporate governance is importance is determined by the power exerted by shareholders and board of directors operations. shareholders having greater sharesThis role of firms owner with larger shares is been reassert by schileifer and Vishny,(1986)as a guarantee of managers discipline when there is capital dispersion, to supervise managers activities is then difficult and very costly to a shareholder taking it individually. Therefore to obtain optimal monitoring which is profi plank to all shareholders, only shareholders with greater shares are allowed to incurred monitoring expenses .It is in this light that Jensen (1993) mentioned the nation of expeditious shareholde rs-Financial monitoring plays a role in situations where a company like joint stock company is been controlled by a group of persons whom because of their share capital contribution or as a result of exotic ownership representative can significantly influence the companys management.-The importance of family monitoring.(Allouche and Amann,2000) regard family shareholding as source of active shareholding .For instance, in Cameroon ,family shareholding have unequal economic roles and they tend to represent the main proportion of the country economic textile .Factors such as confidence and family ties can explain their outstanding performance (Bourdieu,2002)Chapter 5 Research Methodology5.1 IntroductionResearch method deals with the behavior in which datas are collected, analyze and interpreted to achieve the ask objectives. This chapter will treat the design and method used to address the line of business questions as it was mentioned in chapter 1.This research made used of ques tionnaires vision and interview follow .5.2 The questionnaire surveyQuestionnaires is the widely used method in social apprehension fields ((Easterby-Smith et al, 2001 2008). This is a method in which all participants are asked almost the same questions in the same situation (Easterby-Smith et al., 2001 Li et al., 2000Merriam, 1988 Payne, 1980).In this study, a questionnaire was developed from a review of related conceptual, theoretical and pre-tested with a sample of auditing practioners. The questionnaires which is made up of 58 questions in total (see appendix 2) directly addresses the study objectives. This questionnaires centers on the audit committees operations, composition, financial skill, independence, self-evaluation, relationships, major achievements and outstanding challenges liner audit committee .A majority of these questions are Yes or NO question type and in the others, the respondents were expected to rate the committee achievements with a hold of 4(to a grea ter extend ) to a score of 1(not at all).The police detective circulated the questionnaires to all targeted respondents which included audit committee chairpersons, company secretaries and the finance heads of the 3 listed companies in DSX with audit committee in place. This gave a total of 9 questionnaires ( 3 audit committee chairpersons, 3 company Secretaries and 3 finance heads) which was sent to these three sample groups. In regard to external auditors, this research included only auditing firms that carry out the statutory audit of companies listed in the DSX in the most recent 2 years. It is well noted that the DSX have enforce certain qualification for audit firms that can carry out statutory audit of the listed companies. One major qualification is that, the audit crocked has to be a partnership or joint venture entity, nevertheless a majority of the audit firms in Cameroon are owned by sole proprietors .In Cameroon, there are over 30 registered audit firms but only 6 a udit firms are qualified to carry out the external auditing for listed companies in DSX in the last 2 years .this survey involved all the 16 partners of the 6 qualified firms, therefore making a general total sample of 25 that received the questionnaires. add-in 1. The sample Questionnaire survey analysisGroup sample Sample size percentageAC chairpersons 3 12%finance heads 3 12%Company secretaries 3 12%External auditors 16 64% super acid total 25 degree Celsius%5.3 Administration of the questionnaire surveyThe research worker send the questionnaires to the participants on the 12th December 2012 . The Mail package comprised a set of questionnaires, a motivating letter , a free post gasbag and the tec return address. The motivating letter is supportive in gaining high answer rate, this is because the motivating letter clarifies the participants on the purpose and importance of the study. In this motivating letter (see appendix 1), the detective highlights the nature and importan ce of the survey, inviting to terminate the questionnaire, guaranteeing the confidentiality of the participants repartees. To enhance higher response rate by the respondents, the researcher exerted level best efforts to monitor the survey by means of e-mails and telephone calls.5.4 Response of the questionnaire surveyThe researcher mailed a total of 25questionaires out of which he received the response of 23 participants. 6 participants were considered disable in the survey. The details of this is given in the table below.Table 2, response analysisDescription Mail sent Received Response rate unableAC chairpersons 3 3 100% 0Finance heads 3 3 100% 0Company secretaries 3 3 100% 0External auditors 16 10 62.5% 6Total 25 19 76% 6The table shows that an overall response rate of 76% was conceived (19 out of 25).All the AC chairpersons, the finance heads and the company secretaries of the 3 listed companies in DSX (SEMC,SOCAPALM, and SAFACAM) responded to the questionnaires each having a response rate of 100%.However, the External auditor had a response rate of 62.5%( 10 out of 16).6 of the external auditors never responded to the questionnaires due to geographical distribution and busy work schedules .SPSS was used in analyzing the datas , the researcher made use of frequencies to assemble raw data to facilitate interpretation, the average was used to place the scares. However, the researcher did not conduct any statistical analysis since with 19 useable respondents, the subgrouping will be very minute for a significant statistics. Nonetheless, with the fact that 5 of the respondents declared their willingness to further participate in this study and the high questionnaire response rate of 76% the research findings are lock up going to be meaningful.5.5 query SurveyThe primary aim for the researcher to carry out an interview survey in this research is to permit participants to develop further their opinions because the closed questions of the questionnaire se aled participants into arbitrarily limited alternatives (Foddy, 1999). The researcher made used of semi structured interview method in conducting the interview. This method eases the researcher control over the time, content and the arrangement of the interview. Furthermore, this method permitted the interviewer to pose penetrating questions that gave a deeper understanding of the research issue. Consequently, semi-structured interview was carried out to confirm the outcomes of the questionnaire survey and to get a deeper understanding of the findings.5.6 Administration of Interview surveyThe 5 respondents from the questionnaire survey who indicated their willingness for further participation in this study were the participants for the interview. This group of interviewees were made up of 2 AC chairpersons , 2 external auditors and 1 finance head. The researcher contacted the interviewees firstly through telephone to have for appointment. The interviewees were later e-mailed the in terview agenda(see appendix 3) to enable them know beforehand what will be deliberated and also to confirm the appointments(date and time)The Interviews were conducted on working days through telephone, at the start of each interview, the researcher presented himself, explained the purpose for the study and guaranteed the interviewee the confidentiality of their responses. from each one interview lasted for at most 30 minutes. 2 of the participants were interviewed on the same day and the rest of the 3 participants were interviewed on 3 separate days ( all on working days and in the same week).The discussion questions were centered on the participants backgrounds, the attributes of AC (composition, size, qualification, experience),the roles of AC to ensure good corporate governance ,some of the achievements and limitations. The interview ended with words of appreciations from the researcher.All the 5 respondents who opted for the interview made them self-available and their respons es supplemented the questionnaire response to give a deeper understanding of the research issue. The high response rate of the questionnaire survey and the interview will make the research findings and discussion very meaningful.Chapter 6 Finding and Discussions6.1 IntroductionThis chapter is to discuss the findings of the surveys. The researcher is going to present the findings in 3 main subjects of the survey namely audit committee operations, relationships and major achievements/challenges. However, it is very necessary to talk about the background of the respondents that participated in this survey. The details are given in the table below.Table 3. Educational qualification of respondentsDegree AC chairperson Finance heads secretaries External auditors TotalN rate N rate N rate N rate N rateBachelor 0 0 1 33.3% 2 66.7% 0 0 3 16%master 1 33.3% 1 33.3% 1 33.3% 3 30% 6 32%Doctorate 2 66.7% 1 33.4% 0 0 7 70% 10 52%Other 0 0 0 0 0 0 0 0 0 0Total 3 100% 3 100% 3 100% 10 100% 19 100%Th e above table reveals that, out of a sample of 3 for AC chairpersons, 2 chairperson have obtained a doctorate degree as their highest educational qualification(66.7%) and 1 with know degree(33.3%).In the sample of finance heads,1 had a bach degree,1 masters degree and 1 a doctorate degree giving a 33.31% to each degree. In the part of the company secretaries,2 obtained a bachelor degree(66.7%) and 1 a masters degree(33.3%).Lastly for external auditors, out of 10 who responded to the survey(6 where considered unable),3 holds a masters degree(30%) and 7 a doctorate degree(70%).In total, out of 19 respondents who participated in the survey, 3 are holders of bachelor degree(16%),6 holds masters degree(32%) and 10 doctorate degree holders(52%).All the 4 groups of respondent have qualifications and experience in fields related to accounting, finance, economics, marketing and management6.2 The operations of ACIt has been revealed that all the respondents have established audit committee charters, though only 60% of the charters are updated yearly whereas the 40% specified that their charters are been updated as needs arises. This complies with the literature which says that firms should established a tailor made charter, however this is contradictory with the commendation of yearly updates of charters (Hoi et al ,2007 Rezaee et al, 2003).we can story this on the limited human resource capacities in less developed countries (Mensah, 2002).AC has as their main duty to oversee the companys financial reporting scheme. The AC must have th