Τον τελευταίο καιρό σε συνεργασία με τους συνεργάτες μου έχουμε αναπτύξει έντονη δραστηριότητα στον τομέα της Διάσωσης Επιχειρήσεων που αντιμετωπίζουν προβλήματα ρευστότητας, ή άλλα προβλήματα χρηματοοικονομικής ή λειτουργικής φύσεως. Συγκεκριμένα, η άποψη μας έχει ως εξής:
Οι κλασσικές μέθοδοι ανάλυσης οικονομικών καταστάσεων, όταν κανείς σταματάει εκεί, δεν φαίνεται να αρκούν στο να βοηθήσουν την επιχείρηση, το στέλεχος ή τον επιχειρηματία.
Η προστιθέμενη αξία που παρέχεται αφορά την συμβουλευτική για την κάθε επιχείρηση ξεχωριστά, ανάλογα με τις ιδιαιτερότητες και τις ανάγκες της.
Γι αυτό ξεκινάμε από μια ανάλυση –που την παρέχουμε δωρεάν – και μετά από μια «διαγνωστική» κάνουμε τις εκτιμήσεις και τις προτάσεις μας.
Θέματα που αφορούν την παρεχόμενη υπηρεσία:
• Χρηματοδότηση (ρύθμιση δανειακών υποχρεώσεων, factoring, ρύθμιση υποχρεώσεων με προμηθευτές, αύξηση ρευστότητας κλπ )
• Επιδοτήσεις μέσω των κατάλληλων προγραμμάτων
• Διάρθρωση πιστωτικής πολιτικής –τιμολογήσεις, εκπτώσεις κλπ
• Άλλα θέματα που άπτονται της επιχειρησιακής συνέχειας της επιχείρησης (Business Continuity )
• Business Plan (όχι σαν θεωρητικό –φιλοσοφικό εγχειρίδιο αλλά σαν εργαλείο ουσίας)
• Budget & cash flows.
Η υποστήριξη μας δεν αφορά μια στείρα θεωρητική προσέγγιση αλλά συμμετοχή στην εφαρμογή και παρακολούθηση όλων των παραπάνω υπό το πρίσμα μιας οικονομικής διεύθυνσης που θα παρέχεται σε επιχειρήσεις που αδυνατούν να απασχολήσουν Οικονομικό Διευθυντή ή θέλουν να κάνουν μείωση κόστους μισθοδοσίας για την οικονομική διεύθυνση αναβαθμίζοντας παράλληλα την ποιότητα υπηρεσιών της εν λόγω λειτουργίας.
Σε περίπτωση που κάποιος επιθυμεί να επωφεληθεί από τις δυνατότητες βελτίωσης που δίνουμε σε προβληματικές επιχειρήσεις μπορεί να επικοινωνήσει μαζί μου στο 6946000968 ή στο akoutoupis@ba.aegean.gr
Δρ. Ανδρέας Κουτούπης
Πέμπτη 30 Δεκεμβρίου 2010
Παρασκευή 10 Δεκεμβρίου 2010
Συμμετοχή Ανδρέα Κουτούπη στις Εκλογές για την ανάδειξη αντιπροσώπων του Οικονομικού Επιμελητηρίου στις 12 Δεκεμβρίου 2010
Συνοπτικό Κείμενο Θέσεων Ανδρέα Κουτούπη για τις εκλογές για την ανάδειξη αντιπροσώπων στο Οικονομικό Επιμελητήριο της Ελλάδας
Αγαπητοί συνάδελφοι
Αποφάσισα να διεκδικήσω την ψήφο σας για την εκλογή μου για δεύτερη συνεχή τριετία στην Συνέλευση των Αντιπροσώπων του Οικονομικού Επιμελητηρίου Ελλάδας προκειμένου να συνεχίσουμε το έργο μας με την Δημοκρατική Κίνηση Οικονομολόγων (ΔΗΚΙ-Ο). Προσωπικά βλέπω τον ρόλο του Οικονομικού Επιμελητηρίου ως πολύ σημαντικό ειδικότερα στις έντονες περιόδους Οικονομικής Κρίσης που περνάμε. Το Οικονομικό Επιμελητήριο είναι και θα πρέπει να λειτουργεί ως Σύμβουλος της Πολιτείας σε Οικονομικά θέματα.
Και πράγματι τα τελευταία 6 χρόνια το Οικονομικό Επιμελητήριο λειτούργησε όπου του δόθηκε η δυνατότητα ως σύμβουλος της Πολιτείας. Θα ήθελα να δω αυτό τον ρόλο να ενδυναμώνεται και ιδανικά θα ήθελα να δω ΙΚΑΝΟΥΣ συναδέλφους οικονομολόγους να στελεχώνουν τις διάφορες συμβουλευτικές επιτροπές για την καλύτερη οργάνωση και λειτουργία των Οικονομικών Υπηρεσιών του Κράτους.
Άλλα θέματα που θα προσπαθήσω να βοηθήσω στην επιτυχή διεκπεραίωση τους από την νέα διοίκηση περιλαμβάνουν τα εξής:
• Την περαιτέρω κατοχύρωση και αναβάθμιση του Οικονομολογικού Επαγγέλματος.
• Την ποιοτική αναβάθμιση των παρεχόμενων Υπηρεσιών του Οικονομικού Επιμελητηρίου της Ελλάδας.
• Την πιστοποίηση και άλλων ειδικοτήτων του Οικονομολογικού Επαγγέλματος όπως του Οικονομολόγου – Μελετητή, του Χρηματοοικονομικού Συμβούλου, του Οικονομολογού στον Δημόσιο Τομέα και του Εσωτερικού Ελεγκτή. Ειδικά για τον τελευταίο κλάδο από τον οποίο προέρχομαι θα επιδιώξω την οριοθέτηση του επαγγέλματος μας, καθώς επί του παρόντος ο οποιοσδήποτε μπορεί να δηλώνει Εσωτερικός Ελεγκτής χωρίς να πληρεί ελάχιστα κριτήρια σπουδών και τεκμηριωμένης σχετικής επαγγελματικής προϋπηρεσίας.
Είναι πολλά εκείνα τα οποία μπορούμε να πετύχουμε με την συνεργασία όλων και σίγουρα λύση ΔΕΝ αποτελεί ποτέ η αποχή από τις εκλογές.
Με τιμή
Δρ. Ανδρέας Γ. Κουτούπης
Who is Who
Δρ. Ανδρέας Γ. Κουτούπης PhD, CMIIA, CIA, CICA, CCSA
Ο Δρ. Ανδρέας Γ. Κουτούπης είναι ιδρυτής της Ομώνυμης εταιρείας Συμβούλων με βασικό αντικείμενο την Παροχή Υπηρεσιών Εσωτερικού Ελέγχου και την Επιμόρφωση Στελεχών Επιχειρήσεων. Εργάστηκε ως Ανώτερος Διευθυντής (Senior Manager) στο τμήμα Παροχής Υπηρεσιών Εσωτερικού Ελέγχου της PricewaterhouseCoopers Ελλάδος για περισσότερα από δέκα χρόνια έχοντας συμμετοχή σε ελεγκτικά και συμβουλευτικά έργα σε πάνω από 60 επιχειρήσεις και οργανισμούς. Είναι Λέκτορας Λογιστικής στο Ευρωπαϊκό Πανεπιστήμιο Κύπρου και Διδάσκων Λογιστικής και Ελεγκτικής στο τμήμα Περιφερειακής Οικονομικής Ανάπτυξης του Πανεπιστημίου Στερεάς Ελλάδας, στα τμήματα Διοίκησης Επιχειρήσεων και Ναυτιλιακών Σπουδών του Πανεπιστημίου Αιγαίου και στο Μεταπτυχιακό Φορολογίας και Ελεγκτικής στο Πάντειο Πανεπιστήμιο. Είναι κάτοχος πτυχίου Δημόσιας Διοίκησης (Πάντειο Πανεπιστήμιο), Μεταπτυχιακού στον Εσωτερικό Έλεγχο και στην Διοίκηση Επιχειρήσεων (Cass Business School, City University, London-UK), Διδακτορικού Διπλώματος στην Εταιρική Διακυβέρνηση και τον Εσωτερικό Έλεγχο (Πάντειο Πανεπιστήμιο) και πιστοποιημένος Εσωτερικός Ελεγκτής (CMIIA, CIA, CICA, CCSA). Η ερευνητική του δραστηριότητα περιλαμβάνει Δημοσιεύσεις σε επιστημονικά και επαγγελματικά περιοδικά σε θέματα Εταιρικής Διακυβέρνησης, Διαχείρισης Επιχειρηματικών Κινδύνων και Εσωτερικού Ελέγχου. Είναι μέλος του Δ.Σ. του Ελληνικού Ινστιτούτου Εσωτερικών Ελεγκτών και της Συνέλευσης των Αντιπροσώπων του Οικονομικού Επιμελητηρίου Ελλάδας εκλεγμένος με την Δημοκρατική Κίνηση Οικονομολόγων (ΔΗΚΙ-Ο).
Αγαπητοί συνάδελφοι
Αποφάσισα να διεκδικήσω την ψήφο σας για την εκλογή μου για δεύτερη συνεχή τριετία στην Συνέλευση των Αντιπροσώπων του Οικονομικού Επιμελητηρίου Ελλάδας προκειμένου να συνεχίσουμε το έργο μας με την Δημοκρατική Κίνηση Οικονομολόγων (ΔΗΚΙ-Ο). Προσωπικά βλέπω τον ρόλο του Οικονομικού Επιμελητηρίου ως πολύ σημαντικό ειδικότερα στις έντονες περιόδους Οικονομικής Κρίσης που περνάμε. Το Οικονομικό Επιμελητήριο είναι και θα πρέπει να λειτουργεί ως Σύμβουλος της Πολιτείας σε Οικονομικά θέματα.
Και πράγματι τα τελευταία 6 χρόνια το Οικονομικό Επιμελητήριο λειτούργησε όπου του δόθηκε η δυνατότητα ως σύμβουλος της Πολιτείας. Θα ήθελα να δω αυτό τον ρόλο να ενδυναμώνεται και ιδανικά θα ήθελα να δω ΙΚΑΝΟΥΣ συναδέλφους οικονομολόγους να στελεχώνουν τις διάφορες συμβουλευτικές επιτροπές για την καλύτερη οργάνωση και λειτουργία των Οικονομικών Υπηρεσιών του Κράτους.
Άλλα θέματα που θα προσπαθήσω να βοηθήσω στην επιτυχή διεκπεραίωση τους από την νέα διοίκηση περιλαμβάνουν τα εξής:
• Την περαιτέρω κατοχύρωση και αναβάθμιση του Οικονομολογικού Επαγγέλματος.
• Την ποιοτική αναβάθμιση των παρεχόμενων Υπηρεσιών του Οικονομικού Επιμελητηρίου της Ελλάδας.
• Την πιστοποίηση και άλλων ειδικοτήτων του Οικονομολογικού Επαγγέλματος όπως του Οικονομολόγου – Μελετητή, του Χρηματοοικονομικού Συμβούλου, του Οικονομολογού στον Δημόσιο Τομέα και του Εσωτερικού Ελεγκτή. Ειδικά για τον τελευταίο κλάδο από τον οποίο προέρχομαι θα επιδιώξω την οριοθέτηση του επαγγέλματος μας, καθώς επί του παρόντος ο οποιοσδήποτε μπορεί να δηλώνει Εσωτερικός Ελεγκτής χωρίς να πληρεί ελάχιστα κριτήρια σπουδών και τεκμηριωμένης σχετικής επαγγελματικής προϋπηρεσίας.
Είναι πολλά εκείνα τα οποία μπορούμε να πετύχουμε με την συνεργασία όλων και σίγουρα λύση ΔΕΝ αποτελεί ποτέ η αποχή από τις εκλογές.
Με τιμή
Δρ. Ανδρέας Γ. Κουτούπης
Who is Who
Δρ. Ανδρέας Γ. Κουτούπης PhD, CMIIA, CIA, CICA, CCSA
Ο Δρ. Ανδρέας Γ. Κουτούπης είναι ιδρυτής της Ομώνυμης εταιρείας Συμβούλων με βασικό αντικείμενο την Παροχή Υπηρεσιών Εσωτερικού Ελέγχου και την Επιμόρφωση Στελεχών Επιχειρήσεων. Εργάστηκε ως Ανώτερος Διευθυντής (Senior Manager) στο τμήμα Παροχής Υπηρεσιών Εσωτερικού Ελέγχου της PricewaterhouseCoopers Ελλάδος για περισσότερα από δέκα χρόνια έχοντας συμμετοχή σε ελεγκτικά και συμβουλευτικά έργα σε πάνω από 60 επιχειρήσεις και οργανισμούς. Είναι Λέκτορας Λογιστικής στο Ευρωπαϊκό Πανεπιστήμιο Κύπρου και Διδάσκων Λογιστικής και Ελεγκτικής στο τμήμα Περιφερειακής Οικονομικής Ανάπτυξης του Πανεπιστημίου Στερεάς Ελλάδας, στα τμήματα Διοίκησης Επιχειρήσεων και Ναυτιλιακών Σπουδών του Πανεπιστημίου Αιγαίου και στο Μεταπτυχιακό Φορολογίας και Ελεγκτικής στο Πάντειο Πανεπιστήμιο. Είναι κάτοχος πτυχίου Δημόσιας Διοίκησης (Πάντειο Πανεπιστήμιο), Μεταπτυχιακού στον Εσωτερικό Έλεγχο και στην Διοίκηση Επιχειρήσεων (Cass Business School, City University, London-UK), Διδακτορικού Διπλώματος στην Εταιρική Διακυβέρνηση και τον Εσωτερικό Έλεγχο (Πάντειο Πανεπιστήμιο) και πιστοποιημένος Εσωτερικός Ελεγκτής (CMIIA, CIA, CICA, CCSA). Η ερευνητική του δραστηριότητα περιλαμβάνει Δημοσιεύσεις σε επιστημονικά και επαγγελματικά περιοδικά σε θέματα Εταιρικής Διακυβέρνησης, Διαχείρισης Επιχειρηματικών Κινδύνων και Εσωτερικού Ελέγχου. Είναι μέλος του Δ.Σ. του Ελληνικού Ινστιτούτου Εσωτερικών Ελεγκτών και της Συνέλευσης των Αντιπροσώπων του Οικονομικού Επιμελητηρίου Ελλάδας εκλεγμένος με την Δημοκρατική Κίνηση Οικονομολόγων (ΔΗΚΙ-Ο).
Κυριακή 7 Νοεμβρίου 2010
Ensuring the 'True and Fair View principle' of Banks' Financial Statements after the introduction of the application of the IFRS: The Case of Greece*
By Eleni Rogdaki, Associate Professor, Department of Business Administration - University of the Aegean, Dimitrios Kleftodimos, Assistant Professor, Department of Public Administration - Panteion University & Dr. Andreas G. Koutoupis, Lecturer, Department of Business Administration - University of the Aegean.
Abstract
In a highly volatile economic environment, like the one we are facing nowadays, there is a need, increasing day by day, for adequate and reliable information from companies of all sectors of the economy, in a way that everyone would be able to extract the maximum true and fair conclusions. However, emphasis is given to the banking sector, and that’s because banks are the cornerstone of the financial sup-port system especially in periods that economies collapsing, like nowadays.
The present survey examines IFRS requirements, on how significant disclosures should appear adequately in financial reporting. The survey based on the analysis of financial figures combined with: the application of the Standards and requirements of the basic accounting principle of "true and fair view". Specifically:
• Transactions effects and events, that are treated based on specific IFRS , are iso-lated and approximated using an analysis that starts from the overall picture and conclude in analysis of specific transactions.
• Findings and effects of transactions that led to banks financial figures, are collected and evaluated based on specific order (major influence on Bank’s net position).
• In order to try to assess the financial information’s level provided, compared with the disclosure requirements of IFRS for certain transactions and events, the finan-cial statements of listed Athens Stock Exchange Banks for the year 2009 are studied. The survey mainly focusing on events that have significant impact on the assets shown in the Financial Statements of Banks (Balance Sheet, P&L, changes in equity, cash flow) and data taken by key financial indicators as conditions. Survey’s mainly conclusion is that the level of information provided in the published financial statements is constantly improving and tends to reflect adequately Bank’s "true and fair view" without yet being reached the desired level.
Also the survey showed that the incomplete quote mandatory disclosures set by IFRS tend to be bound by a limited number of banks. The weaknesses which have been properly identified classified and analyzed their impact on quality information, while emphasizing the decisive role of regulators in the development of quality of information that will contribute decisively to the emergence of financial position and operations results, as dictated the basic accounting principle and the needs of to-day's world economy.
§1.Introduction
In a highly volatile economic environment, like the one we are facing nowadays, there is a need, increasing day by day, for adequate and reliable information from companies of all sectors of the economy, in a way that everyone would be able to extract the maximum true and fair conclusions. However, emphasis is given to the banking sector, and that’s because banks are the cornerstone of the financial sup-port system especially in periods that economies collapsing, like nowadays. Busi-nesses, which are the cells of the economy in the world, are receiving pressures re-lated to all areas and, if they are not adjusted to quickly to developments, face the problem of sustainability rather than inconsistency in standard operations and prac-tices. An important issue critical in making appropriate decisions of financial/ invest-ing content (and not only) is the production and disclosure of reliable information to the user's which must be provided (offered) by every business sector of the econo-my.
Views and opinions of professional and scientific Unions and Associations concerning the "true financial position," "more appropriately defined outcomes ',' full disclosure ',' required disclosures, etc., are timely and widespread these days, while the relatively recent introduction and application of IFRS in the world demonstrates the need for adjusting these positions and views.
The present study focuses on this subject examining the degree of adequacy of the provided financial reporting on significant disclosures required by International Fi-nancial Reporting Standards. The survey is based on an analysis of the financial figures in conjunction with application of these Standards and in light of the basic accounting principle of "fair view".
§2.The proper meaning of "fair view".
The financial statements should provide essential information to any interested user to extract reliable and true findings relevant to the financial position and results of operations. The development of the quality of information, specifically concerning the listed in the ASE companies, followed by a rapid upward trend that is "largely" substantial interventions, made by professional scientific societies worldwide, and regulators who establish an import rules and procedures in preparing and presenting financial statements prepared by business. The international mandatory application of IFRS is a practical demonstration of the latest effort to achieve that. The overriding purpose of the application of IFRS is to ensure the implementation of the "fair view" of business on the property structure, financial position and profit or loss. In particular, the principle is that the basic objective of financial statements is to show very clearly the "fair view" of the asset structure, financial position and profit or loss.
In particular, the principle of fair view requires:
A) The balance sheet includes all assets and liabilities, the company had at the time of the balance sheet. We should not, ie the balance sheet include fewer or more assets and liabilities than the company was in real. Also, that the funds in the account “income" actually incurred under the generally accepted accounting principles.
B) The balance of the funds generated by the real quantities, and after evaluation in accordance with the provisions laid down by law.
C) The aggregate balance of the funds came from aggregating uniform homogenous sub-funds.
D) The funds are properly called, ie the titles of the bills reflect the true content.
E) The assets shown in the balance sheet based on the degree of liquidation, while the liabilities according to their degree of maturity, in order to result from the balance sheet the financial position of the company.
The true picture under the light of other accounting principles does not coincide with objective truth because in some cases basic deviations from this principle appear. Thus, the rules for valuing assets are governed by the principle of prudence and do not reflect the true value of things (fixed assets at historical cost, the inventories at the lower price between purchase price and current price, etc).
From the foregoing discussion it comes up that this principle establishes the absolute but not the actual picture that emerges on the basis of generally accepted accounting principles. So this principle is subordinate to the principle of prudence and the going concern principle.
In Greece, the annotated principle of "fair view" is a fundamental principle, since the provision of Article 42a § 3 Law 2190/1920 states that:
a. If the provisions of law governing the preparation of financial statements are not sufficient for showing a fair view, any additional information necessary to achieve this goal is provided.
b. If, in exceptional cases, the application of a provision of law governing the prepa-ration of financial statements is inconsistent with the principle of "fair value”, the fair value should be provided.
c. Any such departures disclosed in the notes along with the reasons and information on its effects on the asset structure, of a financial position and results of the company.
§3.Scope of the study.
This study analyzes the impact of International Financial Reporting on the financial figures of listed banks in the ASE. It also examines the degree of adequacy of the provided financial information for specific disclosures required by IFRS. The study is based in the analysis of financial figures in relation to the implementation of certain standards, which affect the banks.
In each section of research an attempt is made to isolate the influence of transac-tions and events that are addressed under specific IFRS. To approximate the effects, we used an analysis alien to the overall picture that leads to the analysis of specific transactions. In this way we try to draw conclusions on the combined effects of these transactions in the financial figures of banks. In addition, the review all the financial statements of listed companies in the ASE listed banks for the year 2009, trying to assess the level of financial information provided in connection with the disclosure requirements of IFRS for certain transactions and events. More specifically, we examined:
• Changes in key financial figures of banks for the years 2009-2008. Details:
1. In the balance sheet were studied briefly the main lines and changes in relation to the previous year, in order to illustrate the overall picture of the state of the financial figures.
2. the most important items of assets and liabilities for uses 2009-2008 were consi-dered and also the balance between long-term and short-term components.
3. The structure of the equity of the banks for the respective years were examined and displayed, and also these changes were presented.
4. the fundamentals of the Income Statement for 2009-2008 were studied and their movements analyzed.
5. the fundamentals of Cash Flows for 2009-2008 were examined and analyzes in the changes between the two uses. We also studied the method used by banks to present the Statement of Cash Flows (direct or indirect method).
6. Alternatively key financial indicators for the use of a more profound analysis of the changes and effects were considered.
• The effects of the implementation of specific standards in financial terms, and the adequacy of disclosures of specific standards in the statements of banks. Specifically:
1. Examined in accordance with the requirements of IFRS 2, the effect of the income and the adequacy of disclosures that banks quote in their financial statements.
2. According to the requirements of IFRS 3 and IAS 36 the effect of goodwill on ac-quisitions in the banking sector in the balance sheet of banks, and the information disclosed by banks in the acquisition of subsidiaries or associates of banks were examined. Also, the depreciation of goodwill, the effect of the damages, the results and the adequacy of the disclosures were examined.
3. The held for sale and the assets and liabilities associated with them were studied, and the effect on the results of functional classification as discontinued operations. At the same time the proposed scrutiny of the adequacy of disclosures that banks quote in the Financial Statements according to IFRS5.
4. Pursuant to the requirements of IFRS 7, the requirements that banks have pre-sented as delayed but not impaired and the adequacy of the disclosure of liquidity risk, credit risk and sensitivity analysis regarding the risk of change interest rates were discussed.
5. It was examined whether, in accordance with IAS 1, the references to the Balance Sheet, the Statement of Changes in Equity and Cash Flows, are sufficient, with the disclosure of financial statements. Furthermore, we examined the adequacy of the explanations in the financial statements on assumptions and estimates of Management.
6. Regarding the implementation of IAS 2, we examined the change in inventories between two years, and the rate of decline in value.
7. Under the provision of IAS 12, we examined the effects on the balance sheet from the recognition of deferred tax assets and liabilities, the relationship between them and the impact on the outcome of the recognition of deferred taxes. Moreover we examined whether the banks shall separate the disclosures of taxes for tax-control objectives of the unaudited periods.
8. Based on the requirements of IAS 16 & 17, the effect on the balance sheet recog-nition of tangible assets held through finance leases, and whether the disclosures were adequate for financial leases were examined. Similarly, under IAS 19, the ef-fect of recognized obligations to employees and the impact on operating results from the recognition of additional provisions.
9. the adequacy of related party disclosures as required by IAS 24 and its effect on the Balance Sheet and Income Statement from the consolidation of the equity invest-ment of in subsidiaries and joint ventures, as required by the IAS 28 & 31 were examined.
10. Given the requirements of IAS 32-39, we studied the structure of financial assets, the adequacy of disclosures for financial assets, valuated at fair value through profit or loss and available-for-sale financial assets assets. In addition to the above, we examined the effects of recognition as held for sale assets and derivative financial instruments.
11. In accordance with IAS 37 we examined the effect on the balance sheet from the recognition of provisions and the adequacy of disclosures for contingent assets and liabilities. Similarly, in accordance with IAS 38, the distribution of intangible assets in key categories of intangible assets and the change between the two uses was examined.
12. We studied the effects on the balance sheet from recognition of investment property and use the results of their adjustment to fair values and the way that banks preferred to valuate property investment based on IAS 40
13. Finally, in accordance with IAS 41, we examined the effects on the balance sheet from the recognition of the biological assets and the effects on the results of their adjustment to fair value.
§ 4. Sources of the study.
The study was conducted by collecting data and drawing on relevant information as they are reported in published financial statements of banks for the year 2009 and the disclosures and notes of all those listed banks on the Stock Exchange.
It should be noted that:
•disclosures relating to the Consolidated Financial Statements were used.
• In the case where two or more banks within the same group, only the disclosures of the consolidated financial statements of the parent-trends, which have been recorded and the disclosures of its subsidiaries were taken into account.
• The extraction of the data directly from the notes of the financial statements could not be done for all the banks, either because of lack of knowledge or because of lack of the relevant disclosures in certain statements. We should note that these cases are limited, nevertheless it was not possible to assess the significance of the omissions in connection with the figures related.
• The results were obtained from the amounts of the financial statements according to the application of specific standards. Any standard application that have not been disclosed, will bring changes to these results.
• The conclusions as to the adequacy of the information provided on the application of specific standards, resulted in combination, on the basis below:
1. The requirements of IFRS
2. The degree of materiality of disclosure in relation to the activities of the bank
3. The figures that are related to omissions
4. The general practices of banks and
5. Any points from the competent authorities (SEC, ELTE, SOEL).
Finally, we note that no studies are presented on effects of per unit standards or cat-egories where specific standards do not apply or their application does not affect substantially.
§5.Effects of the application of IFRS in ASE’s Banking sector. Conclusions
From the research conducted we noted the following issues:
• During the year 2009 the total assets of listed banks increased significantly (+23%), mainly due to the growth of loans (+30%).
• The liabilities of the banks had a significant increase (+23%), with significance in the change of deposits from customers by 17%.
• Total equity of banks grew by 19% mainly due to the significant increase in the share capital and their results.
• The banks sector experienced an impressive increase in net profit by 69%. The to-tal net profit in the amount of approximately € 5 billion., Giving the return on equity at around 17%.
• The operating efficiency ratio improved in 2009 than in 2008 (about 1%) as a result of the increase in operating income of the banks.
• It is important that the banks in 2009, total decreased the bad debt provision in relation to the year 2008, despite the significant increase in their lending
• The significant changes in the allocations of the cash flows show the necessary, no issue of credit to cover the cash deficit of cash deposit in connection with the outflow of funds. At the same time, a growth in cash flows from investing activities was presented, due to emission of investment securities, leading to a significant increase in cash at the end of the year (+20%).
An approximately 65% of financial assets outside the claims of the banking group is related to items carried at fair value through profit or loss, while about 10% is va-luated on data from the depreciated cost. Note that in the year 2009, total invest-ments in securities declined to marginal rate. (About 2%).
• The compliance of banks with regard to the requirements of IFRS 7 is fairly good. However, points that can be improve is the quote maturity panel, better information regarding the credit rating requirements and the fair value of collateral claims.
• The total capital adequacy ratio averaged 11% in 2009, considerably higher than the institutional level. (About 8%).
• During fiscal year 2009 the total profits were over € 300 million from revaluation and sale of financial assets at fair value through profit or loss (IAS 39).
• As an effect after the application of IAS 40, banks recorded total profits of more than € 100 million from revaluation of investment properties in fair value.
Survey’s mainly conclusion is that the level of information provided in the published financial statements is constantly improving and tends to reflect adequately Bank’s ‘true and fair view’ without yet being reached the desired level.
Also the survey showed that the incomplete quote mandatory disclosures set by IFRS tend to be bound by a limited number of banks.
The weaknesses which had been properly identified classified and analyzed their impact on quality information, while emphasizing the decisive role of regulators in the development of quality of information that will contribute decisively to the emergence of financial position and operations results, as dictated the basic accounting principle and the needs of today’s world economy.
§ 6. Findings.
• When comparing the basic figures of the Balance Sheet for the fiscal year, 2009-2008, we found that during the year 2009 the total assets of the banks increased significantly (approximately 23%). This increase was mainly attributed to a significant increase in loans to customers (over 30%). In addition to that, there was also an increase in customer deposits, but at a lower rate (17%). It should be also noted that this increase refers to on organic growth as the acquisitions of subsidiaries contributed to the augmentation of the assets in a small proportion.
• After analyzing the banks’ Assets and Liabilities for the fiscal year 2009-2008, we found that the rate of loans to total assets increased by approximately (+6%), in comparison to the previous year rate, and reached a level of 65%. Along with in-vestments in securities, loans represent more than 80% of the bank’s total assets. At the same time, the client deposits and debt securities fund the banks total assets (over 60% and 10% respectively). While loans have increased, investments in securities presented a marginal decrease. In particular, the trading portfolio and other assets at fair value showed a marginal increase (of about 4%) while there was a reduction of (-14%) in the banks’ investment portfolio. The main causes behind these reductions were the significant liquidations of securities and, to a smaller extent, the loss that was incurred in the banks’ bond portfolio. Customer deposits which are the most important source of financing for banks grew at a lower rate than the growth rate of loans. The relative financial deficit was financed primarily by issuing new debt securities.
• An important outcome of the analysis of the Equity in 2009-2008, was that the Banks’ capital increased mainly due to important augmentations in equity instead of cash.
• Another important finding after analyzing the Profit and Loss Account of 2009-2008, is that in the fiscal year 2009, banks recorded an impressive increase in profitability with net profit after tax (more than 69%) in comparison to the previous period. Fac-tors that contributed to increased profitability are the increase of net interest income, as a result of loan growth, and the increased commission of bank and stock transactions. Moreover, it should be noted that several banks recorded significant financial profit after the liquidation of their investments. Profit was also recorded as a result a reduction in the creation of provisions for loans and a lower tax burden. Interest income remained the main source of income for banks. However, in the fiscal year, the contribution of financial results from financial transactions such as of investments’ valuations increased by + 1% and amounted to about 15% of total revenue. In terms of costs, organizational costs increase was less than the increase in total revenue, thus improving the efficiency ratio. The decrease in provisions during the year resulted in a reduction of the banks’ spending at a rate of about 15% of their total costs. Total operating expenses, as a percentage of revenues, decreased in the fiscal year 2009 compared to 2008, which indicates the efforts of banks to increase their functional efficiency. At the same time, in 2009, the banks formed a proportionate less provision for impairment. Thus, the ratio of loan impairment provisions to total revenue, compared with 2008, decreased approximately by 27%.
• By examining the results recognized directly in equity, we observed that, apart from earnings, equity was also reduced at the amount of profit and loss that is recognized directly in equity. The most important reduction derives mainly from the reversal of previous years' profits from investments, which was divested during the current year as well as from the valuation of relevant investment in the current fiscal year.
• The cash-flow analysis of 2009-2008 showed that, overall, cash for the fiscal year 2009 registered a significant increase compared to those of the previous fiscal year. Moreover, there were significant rearrangements in the headings of the Cash Flow Statements which show the progress of Greek banks as far as their investment, fi-nancial and functional activities are concerned. The cash deficit from operational activities is attributed mainly to the large increase in loans and to the lower relative increase in deposits. The flows from financial activities increased significantly mainly as a result of the issuance of new debt securities. There was also a significant decrease in the total cash outflow from investing activities primarily due to significant disposals of securities of investment portfolios. Finally, Cash Flow Statements display a significant increase in the payment of dividends, which reflects the increased profitability of Greek banks.
• While analyzing the financial ratios of 2009-2008, we observed that the large in-crease in customer loans, together with a significantly smaller increase in customers’ deposits, resulted at a rate of about 12%. Similarly, there was an increase in the efficiency ratio of the total assets of listed banking groups (more than 38%) and equity (more than 38%).
• In accordance with IFRS 2, employee benefits based on equity securities must be evaluated at fair value on the grant date and must be recognized in income partially while providing the service to the employees. Banks’ net profit after taxes were charged about 3% from the application of IFRS 2. In 2009 several banks were run-ning stock option programs to their staff. Regarding the providing of necessary dis-closures as required by IFRS 2, to enable users of financial statements to under-stand the basis of measurement of expenses, it is observed that, in general, banks have complied with the relevant provisions.
• The requirements of IFRS 3 demand the recognition of almost all intangible assets of a bank that is acquired separately from its goodwill. During 2009, the majority of banking groups identified intangible assets thus presenting goodwill in their balance sheets. Also in the same fiscal year, there were some acquisitions which resulted in goodwill. In general, the banking sector complied with the requirements of the IFRS and provided adequate information regarding these acquisitions. Banks should perform an impairment test of their goodwill assets on a year basis. They should also include the factors used for calculating the impairment of goodwill especially as far as the creation of cash flows, the weighted average growth rate and their operations is concerned. Most of the banks that have recognized goodwill comply with these disclosures.
• After studying the application of IAS 27-28-31, we came to the conclusion that all listed banks prepare consolidated financial statements. However, it was observed that a very small number of banks did not incorporate all their subsidiaries but they excluded those that had minor impact. The majority of banking groups have invested in affiliated banks, which are incorporated with the equity method. Investments in associates for the year 2009, presented a decrease compared to the year 2008, as a result of the clearance sale of major investment outside the financial sector.
• An analysis of the implementation of IFRS 5 showed that there was a significant decrease of assets categorized as “kept for sale” in the period ending in 2009 and the corresponding reduction in obligations of non-current assets was mainly due to the clearance part of their business from banking groups. The details of these activities were classified as held for sale since 2008 but the sale was completed in 2009. A small number of banking groups presents discontinued operations in their financial statements and the corresponding results from discontinued operations represent approximately 7% of total profits after tax of these banks.
• As demonstrated by the aforementioned analysis, IFRS 32 & 39 are the major ac-counting standards for banks. Listed banking groups have all investment categories listed in IFRS 39 and apply hedge accounting. IFRS 7 has a significant contribution to the quality of information as the financial risks of banks are concerned. About 70% of financial assets, apart from requirements, relate to items evaluated at fair value through the profit and loss account, 24% of assets evaluated at fair value and recognized in equity (available-for- sale), while the rest of the data is measured at amortized cost (investments held to maturity). The disclosures in the financial statements show that the minimum amount of banks has no investments in assets at their fair value through profit and loss account, while the majority of these are investments available for sale and held to maturity. During the fiscal year 2009, banks recorded earnings from the valuation and trading assets at fair value through profit or loss in an extremely increased rate compared with 2008.
• By analyzing the application of IFRS 7 we found that, in general, banks have com-plied with the requirements of the standard regarding their exposure to financial risks, although several areas requiring improvement have been identified. Findings on the adequacy of such disclosures by risk category are:
i)Liquidity risk: The total number of banks presents a chronological analysis of the maturity of its obligations, as well as a brief description of how to manage liquidity risk. However, only half of the banks have complied with the new requirements of the Standard regarding the presentation of maturity based on the total future contractual payments on an undiscounted basis. In contrast, the remaining banks used accounting discounted values for the relevant disclosure.
ii) Market risk: Information about banks' exposure to market risk was satisfactory.
iii) Credit risk: The adequacy of information was considered satisfactory in reference to credit risk except, perhaps the providing of information regarding fair value of loans that are in delay or impaired. Shortages also are emerging in the providing of information on claims which were settled in the fiscal year. Regarding the analysis of the credit rating of loans, it is noted that while all banks have an analysis, there were cases where banks had classified nearly all their loans into a single class or had marked a significant amount of loans to unrated. The quality of the information provided in this case requires significant improvements.
iv) Other disclosures: Most of the banks listed on the ASE, show evidence of the fair value of all-financial assets and liabilities.
v) Capital management: All banks present data on the management of the funds and their capital adequacy requirements under the requirements set in IFRS 7. It was found that the ratio of total adequacy in the year 2009 was higher than the institutional level, such that it enables most banks to adequately cover the increased activity in all sectors.
• From the analysis of the loan portfolio’s quality, it was found that the portfolio of Greek listed banks presents a decrease in the category of impaired loans, due to 2009 loan write-offs. It is reported that there were deletions in banks more than twice those in previous years. There was also a significant increase in total delayed non-impaired loans. The percentage of loans in arrears more than 90 days for which no provision was made presented a low percentage of the total portfolio, whereas there was great variation in the category of impaired loans. The percentage of non-performing loans for all banking groups in 2009 was lower by about 4 percentage points compared with 2008 mainly due to loan write-offs. We should mention that in this study as non-performing loans one could identify loans that are on delay for more than 0 days and the loans are impaired and may differ, from what the management of each bank considers right. Finally, an important change occurred in loan write-offs as a percentage of loans impaired write-offs for the year 2009-2008.
• As far as the results from the application of IAS 1 are concerned, the financial state-ments of banking groups for the year 2009, showed significant problems in terms of adequacy of references to financial data of the balance sheet and Profit and Loss Statement. However, some banks do not provide sufficient information on the as-sessment made by the authorities in the process of preparing its financial state-ments.
• An analysis of IAS 12 showed that for the year 2008, the rate of recognition of de-ferred tax assets were extremely high and nearly triple in size compared with the corresponding tax liabilities. This rate fell dramatically in 2009. This decrease is due to the additional recognition of deferred tax liabilities. A significant proportion of the deferred tax liabilities in respect to corresponding taxes on intangible assets arose from the acquisition of banks in accordance with IFRS 3. The most significant causes for the recognition of deferred tax assets are the estimation of bad debts that have not yet recognized and the recognition of tax liabilities for retirement benefits to staff. While the deferred tax assets in 2009 was about equal to those of 2008, deferred tax liabilities appear in approximately 50% more than those of 2008. Despite the important decrease in the net liabilities (after the counterbalance), the problem on whether banks should counterbalance their tax assets with their tax profit in the foreseeable future still remains.
• By analyzing the application of IAS 16-17, we found that banks acquired tangible fixed assets through leasing contracts at marginal rates. In addition to loans and other core banking activities, banks have significant operations leasing activities. We examined the ratio of receivables from finance leases as a percentage of total receivables from customers and other loans and a significant increase over the comparative period of the leasing business in 2009 was shown, while the percentage of all the other requirements from customers were approximately 3% . A similar percentage was observed in year 2008. In conclusion, the demands on finance leases are still a small share of banks' business.
• The liabilities of banks due to the retirement of their staff, according to the study of the application of IAS 19, declined significantly during 2009, mainly due to allocation of these benefits to ETAT, which is a fund of predefined contribution plan.
• The degree of adequacy of disclosures, regarding transactions with related parties, as required by IAS 24, is generally satisfactory. All the Financial Statements include details of transactions with related parties, distinguished according to their relation-ship with each bank.
• An analysis of the implementation of IAS 37 and IFRS 4 found that, in general, the information provided on the provisions is limited as several banks avoid analyzing the nature of their provisions in the Financial Statements. Fewer deficiencies are found in the disclosure of provisions for insurance liabilities and charges. Provisions for tax audit differences as disclosed in the financial statements remained almost unchanged compared with the year 2008, while estimates for other risks not known in detail showed an increase (approximately 28%). Most banking groups have insurance sector, provide all disclosures for the management of insurance risks and in order to check the adequacy of insurance reserves undertaken.
• According to the application of IAS 33 it was found that the average of basic earn-ings per share of the banking group for the year 2009 shows an increase (+75%) and is in harmony with the significant increase in profitability over the same period. Several banking groups have no financial resources and are likely to cause a decrease in basic earnings per share. Therefore it is not required to provide relevant information for diluted earnings per share.
• Analysis of the implementation of IFRS 38 showed that the intangible assets that have come from local banks as a deposit base, customer relationships, distinctive titles, etc are the largest category of intangible assets, represent approximately 80% of their total value. Investment in software, which is the largest investments in intangible assets are also very important.
• Finally, the finding from the analysis of the implementation of IAS 40, is that all the banking groups hold investment property, most of which is evaluated at fair value. During 2009, banks resulted in profits of over € 100 million from the revaluation of properties at fair value. It should be noted, however, that an analysis based on data supplied by the banks themselves and some banks are likely to be recognized on profits, but not to show separately.
References:
1. International Accounting, by Frederick D. Choi, Gary K. Meek, Publisher: Prentice Hall; 7 edition (August 2, 2010)
2. Advanced Accounting, by Debra Jeter, Paul Chaney, Publisher: Wiley; 4 edition (December 9, 2009)
3. Advanced Accounting, Study Guide with Working Papers in Excel, by Debra Jeter, Paul Chaney, Paperback: 312 pages Publisher: Wiley; 4 edition (February 2, 2010)
4. Corporate Accounting: Theory and Practice, by Nirmal Gupta, Chhavi Sharma, Pa-perback: 714 pages Publisher: Global Professional Publishing (June 2010)
5. Financial Accounting & Reporting, by Barry Elliott, Jamie Elliott, Publisher: Prentice Hall; 13 edition (December 13, 2009)
6. Financial Accounting: IFRS, by Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, Hardcover: 848 pages Publisher: Wiley; 1 edition (May 24, 2010)
7. Financial Accounting, Study Guide: IFRS Edition, by Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, Paperback: 408 pages Publisher: Wiley; 1 edition (June 28, 2010)
8. Intermediate Accounting: IFRS Edition, by Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Hardcover: 688 pages Publisher: Wiley; 21 edition (July 20, 2010)
9. Intermediate Accounting: IFRS Approach 1st Edition Volume 1 and Volume 2 Set, by Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Publisher: Wiley (Septem-ber 17, 2010)
10. Applying IFRS for SMEs, by Bruce Mackenzie, Publisher: Wiley (May 3, 2010)
11. IFRS 2010: Interpretation and Application of International Financial Reporting Stan-dards, by Barry J. Epstein, Eva K. Jermakowicz, Πublisher: Wiley; Revised edition edition (February 5, 2010)
12. Understanding IFRS Fundamentals: International Financial Reporting Standards, by Yass A. Alkafaji et al, Paperback: 432 pages Publisher: Wiley (May 24, 2010)
13. Financial Statements: A Step-by-Step Guide to Understanding and Creating Finan-cial Reports, by Thomas R. Ittelson, Paperback: 288 pages Publisher: Career Press; Revised edition (August 15, 2009)
14. http://www.iasc.org.uk (Official site of the International Accounting Standard Board).
15. http://www.fasb.org (Official site of the Financial Accounting Standards Board).
16. Greek Law 2190 / 1920.
*Η κατωτέρω εργασία παρουσιάσθηκε σέ Διεθνές Ακαδημαϊκό Συνέδριο (ΙCABE 2010) στην Λα Κορούνια της Ισπανίας την Παρασκευή 10 Σεπτεμβρίου 2010.
Abstract
In a highly volatile economic environment, like the one we are facing nowadays, there is a need, increasing day by day, for adequate and reliable information from companies of all sectors of the economy, in a way that everyone would be able to extract the maximum true and fair conclusions. However, emphasis is given to the banking sector, and that’s because banks are the cornerstone of the financial sup-port system especially in periods that economies collapsing, like nowadays.
The present survey examines IFRS requirements, on how significant disclosures should appear adequately in financial reporting. The survey based on the analysis of financial figures combined with: the application of the Standards and requirements of the basic accounting principle of "true and fair view". Specifically:
• Transactions effects and events, that are treated based on specific IFRS , are iso-lated and approximated using an analysis that starts from the overall picture and conclude in analysis of specific transactions.
• Findings and effects of transactions that led to banks financial figures, are collected and evaluated based on specific order (major influence on Bank’s net position).
• In order to try to assess the financial information’s level provided, compared with the disclosure requirements of IFRS for certain transactions and events, the finan-cial statements of listed Athens Stock Exchange Banks for the year 2009 are studied. The survey mainly focusing on events that have significant impact on the assets shown in the Financial Statements of Banks (Balance Sheet, P&L, changes in equity, cash flow) and data taken by key financial indicators as conditions. Survey’s mainly conclusion is that the level of information provided in the published financial statements is constantly improving and tends to reflect adequately Bank’s "true and fair view" without yet being reached the desired level.
Also the survey showed that the incomplete quote mandatory disclosures set by IFRS tend to be bound by a limited number of banks. The weaknesses which have been properly identified classified and analyzed their impact on quality information, while emphasizing the decisive role of regulators in the development of quality of information that will contribute decisively to the emergence of financial position and operations results, as dictated the basic accounting principle and the needs of to-day's world economy.
§1.Introduction
In a highly volatile economic environment, like the one we are facing nowadays, there is a need, increasing day by day, for adequate and reliable information from companies of all sectors of the economy, in a way that everyone would be able to extract the maximum true and fair conclusions. However, emphasis is given to the banking sector, and that’s because banks are the cornerstone of the financial sup-port system especially in periods that economies collapsing, like nowadays. Busi-nesses, which are the cells of the economy in the world, are receiving pressures re-lated to all areas and, if they are not adjusted to quickly to developments, face the problem of sustainability rather than inconsistency in standard operations and prac-tices. An important issue critical in making appropriate decisions of financial/ invest-ing content (and not only) is the production and disclosure of reliable information to the user's which must be provided (offered) by every business sector of the econo-my.
Views and opinions of professional and scientific Unions and Associations concerning the "true financial position," "more appropriately defined outcomes ',' full disclosure ',' required disclosures, etc., are timely and widespread these days, while the relatively recent introduction and application of IFRS in the world demonstrates the need for adjusting these positions and views.
The present study focuses on this subject examining the degree of adequacy of the provided financial reporting on significant disclosures required by International Fi-nancial Reporting Standards. The survey is based on an analysis of the financial figures in conjunction with application of these Standards and in light of the basic accounting principle of "fair view".
§2.The proper meaning of "fair view".
The financial statements should provide essential information to any interested user to extract reliable and true findings relevant to the financial position and results of operations. The development of the quality of information, specifically concerning the listed in the ASE companies, followed by a rapid upward trend that is "largely" substantial interventions, made by professional scientific societies worldwide, and regulators who establish an import rules and procedures in preparing and presenting financial statements prepared by business. The international mandatory application of IFRS is a practical demonstration of the latest effort to achieve that. The overriding purpose of the application of IFRS is to ensure the implementation of the "fair view" of business on the property structure, financial position and profit or loss. In particular, the principle is that the basic objective of financial statements is to show very clearly the "fair view" of the asset structure, financial position and profit or loss.
In particular, the principle of fair view requires:
A) The balance sheet includes all assets and liabilities, the company had at the time of the balance sheet. We should not, ie the balance sheet include fewer or more assets and liabilities than the company was in real. Also, that the funds in the account “income" actually incurred under the generally accepted accounting principles.
B) The balance of the funds generated by the real quantities, and after evaluation in accordance with the provisions laid down by law.
C) The aggregate balance of the funds came from aggregating uniform homogenous sub-funds.
D) The funds are properly called, ie the titles of the bills reflect the true content.
E) The assets shown in the balance sheet based on the degree of liquidation, while the liabilities according to their degree of maturity, in order to result from the balance sheet the financial position of the company.
The true picture under the light of other accounting principles does not coincide with objective truth because in some cases basic deviations from this principle appear. Thus, the rules for valuing assets are governed by the principle of prudence and do not reflect the true value of things (fixed assets at historical cost, the inventories at the lower price between purchase price and current price, etc).
From the foregoing discussion it comes up that this principle establishes the absolute but not the actual picture that emerges on the basis of generally accepted accounting principles. So this principle is subordinate to the principle of prudence and the going concern principle.
In Greece, the annotated principle of "fair view" is a fundamental principle, since the provision of Article 42a § 3 Law 2190/1920 states that:
a. If the provisions of law governing the preparation of financial statements are not sufficient for showing a fair view, any additional information necessary to achieve this goal is provided.
b. If, in exceptional cases, the application of a provision of law governing the prepa-ration of financial statements is inconsistent with the principle of "fair value”, the fair value should be provided.
c. Any such departures disclosed in the notes along with the reasons and information on its effects on the asset structure, of a financial position and results of the company.
§3.Scope of the study.
This study analyzes the impact of International Financial Reporting on the financial figures of listed banks in the ASE. It also examines the degree of adequacy of the provided financial information for specific disclosures required by IFRS. The study is based in the analysis of financial figures in relation to the implementation of certain standards, which affect the banks.
In each section of research an attempt is made to isolate the influence of transac-tions and events that are addressed under specific IFRS. To approximate the effects, we used an analysis alien to the overall picture that leads to the analysis of specific transactions. In this way we try to draw conclusions on the combined effects of these transactions in the financial figures of banks. In addition, the review all the financial statements of listed companies in the ASE listed banks for the year 2009, trying to assess the level of financial information provided in connection with the disclosure requirements of IFRS for certain transactions and events. More specifically, we examined:
• Changes in key financial figures of banks for the years 2009-2008. Details:
1. In the balance sheet were studied briefly the main lines and changes in relation to the previous year, in order to illustrate the overall picture of the state of the financial figures.
2. the most important items of assets and liabilities for uses 2009-2008 were consi-dered and also the balance between long-term and short-term components.
3. The structure of the equity of the banks for the respective years were examined and displayed, and also these changes were presented.
4. the fundamentals of the Income Statement for 2009-2008 were studied and their movements analyzed.
5. the fundamentals of Cash Flows for 2009-2008 were examined and analyzes in the changes between the two uses. We also studied the method used by banks to present the Statement of Cash Flows (direct or indirect method).
6. Alternatively key financial indicators for the use of a more profound analysis of the changes and effects were considered.
• The effects of the implementation of specific standards in financial terms, and the adequacy of disclosures of specific standards in the statements of banks. Specifically:
1. Examined in accordance with the requirements of IFRS 2, the effect of the income and the adequacy of disclosures that banks quote in their financial statements.
2. According to the requirements of IFRS 3 and IAS 36 the effect of goodwill on ac-quisitions in the banking sector in the balance sheet of banks, and the information disclosed by banks in the acquisition of subsidiaries or associates of banks were examined. Also, the depreciation of goodwill, the effect of the damages, the results and the adequacy of the disclosures were examined.
3. The held for sale and the assets and liabilities associated with them were studied, and the effect on the results of functional classification as discontinued operations. At the same time the proposed scrutiny of the adequacy of disclosures that banks quote in the Financial Statements according to IFRS5.
4. Pursuant to the requirements of IFRS 7, the requirements that banks have pre-sented as delayed but not impaired and the adequacy of the disclosure of liquidity risk, credit risk and sensitivity analysis regarding the risk of change interest rates were discussed.
5. It was examined whether, in accordance with IAS 1, the references to the Balance Sheet, the Statement of Changes in Equity and Cash Flows, are sufficient, with the disclosure of financial statements. Furthermore, we examined the adequacy of the explanations in the financial statements on assumptions and estimates of Management.
6. Regarding the implementation of IAS 2, we examined the change in inventories between two years, and the rate of decline in value.
7. Under the provision of IAS 12, we examined the effects on the balance sheet from the recognition of deferred tax assets and liabilities, the relationship between them and the impact on the outcome of the recognition of deferred taxes. Moreover we examined whether the banks shall separate the disclosures of taxes for tax-control objectives of the unaudited periods.
8. Based on the requirements of IAS 16 & 17, the effect on the balance sheet recog-nition of tangible assets held through finance leases, and whether the disclosures were adequate for financial leases were examined. Similarly, under IAS 19, the ef-fect of recognized obligations to employees and the impact on operating results from the recognition of additional provisions.
9. the adequacy of related party disclosures as required by IAS 24 and its effect on the Balance Sheet and Income Statement from the consolidation of the equity invest-ment of in subsidiaries and joint ventures, as required by the IAS 28 & 31 were examined.
10. Given the requirements of IAS 32-39, we studied the structure of financial assets, the adequacy of disclosures for financial assets, valuated at fair value through profit or loss and available-for-sale financial assets assets. In addition to the above, we examined the effects of recognition as held for sale assets and derivative financial instruments.
11. In accordance with IAS 37 we examined the effect on the balance sheet from the recognition of provisions and the adequacy of disclosures for contingent assets and liabilities. Similarly, in accordance with IAS 38, the distribution of intangible assets in key categories of intangible assets and the change between the two uses was examined.
12. We studied the effects on the balance sheet from recognition of investment property and use the results of their adjustment to fair values and the way that banks preferred to valuate property investment based on IAS 40
13. Finally, in accordance with IAS 41, we examined the effects on the balance sheet from the recognition of the biological assets and the effects on the results of their adjustment to fair value.
§ 4. Sources of the study.
The study was conducted by collecting data and drawing on relevant information as they are reported in published financial statements of banks for the year 2009 and the disclosures and notes of all those listed banks on the Stock Exchange.
It should be noted that:
•disclosures relating to the Consolidated Financial Statements were used.
• In the case where two or more banks within the same group, only the disclosures of the consolidated financial statements of the parent-trends, which have been recorded and the disclosures of its subsidiaries were taken into account.
• The extraction of the data directly from the notes of the financial statements could not be done for all the banks, either because of lack of knowledge or because of lack of the relevant disclosures in certain statements. We should note that these cases are limited, nevertheless it was not possible to assess the significance of the omissions in connection with the figures related.
• The results were obtained from the amounts of the financial statements according to the application of specific standards. Any standard application that have not been disclosed, will bring changes to these results.
• The conclusions as to the adequacy of the information provided on the application of specific standards, resulted in combination, on the basis below:
1. The requirements of IFRS
2. The degree of materiality of disclosure in relation to the activities of the bank
3. The figures that are related to omissions
4. The general practices of banks and
5. Any points from the competent authorities (SEC, ELTE, SOEL).
Finally, we note that no studies are presented on effects of per unit standards or cat-egories where specific standards do not apply or their application does not affect substantially.
§5.Effects of the application of IFRS in ASE’s Banking sector. Conclusions
From the research conducted we noted the following issues:
• During the year 2009 the total assets of listed banks increased significantly (+23%), mainly due to the growth of loans (+30%).
• The liabilities of the banks had a significant increase (+23%), with significance in the change of deposits from customers by 17%.
• Total equity of banks grew by 19% mainly due to the significant increase in the share capital and their results.
• The banks sector experienced an impressive increase in net profit by 69%. The to-tal net profit in the amount of approximately € 5 billion., Giving the return on equity at around 17%.
• The operating efficiency ratio improved in 2009 than in 2008 (about 1%) as a result of the increase in operating income of the banks.
• It is important that the banks in 2009, total decreased the bad debt provision in relation to the year 2008, despite the significant increase in their lending
• The significant changes in the allocations of the cash flows show the necessary, no issue of credit to cover the cash deficit of cash deposit in connection with the outflow of funds. At the same time, a growth in cash flows from investing activities was presented, due to emission of investment securities, leading to a significant increase in cash at the end of the year (+20%).
An approximately 65% of financial assets outside the claims of the banking group is related to items carried at fair value through profit or loss, while about 10% is va-luated on data from the depreciated cost. Note that in the year 2009, total invest-ments in securities declined to marginal rate. (About 2%).
• The compliance of banks with regard to the requirements of IFRS 7 is fairly good. However, points that can be improve is the quote maturity panel, better information regarding the credit rating requirements and the fair value of collateral claims.
• The total capital adequacy ratio averaged 11% in 2009, considerably higher than the institutional level. (About 8%).
• During fiscal year 2009 the total profits were over € 300 million from revaluation and sale of financial assets at fair value through profit or loss (IAS 39).
• As an effect after the application of IAS 40, banks recorded total profits of more than € 100 million from revaluation of investment properties in fair value.
Survey’s mainly conclusion is that the level of information provided in the published financial statements is constantly improving and tends to reflect adequately Bank’s ‘true and fair view’ without yet being reached the desired level.
Also the survey showed that the incomplete quote mandatory disclosures set by IFRS tend to be bound by a limited number of banks.
The weaknesses which had been properly identified classified and analyzed their impact on quality information, while emphasizing the decisive role of regulators in the development of quality of information that will contribute decisively to the emergence of financial position and operations results, as dictated the basic accounting principle and the needs of today’s world economy.
§ 6. Findings.
• When comparing the basic figures of the Balance Sheet for the fiscal year, 2009-2008, we found that during the year 2009 the total assets of the banks increased significantly (approximately 23%). This increase was mainly attributed to a significant increase in loans to customers (over 30%). In addition to that, there was also an increase in customer deposits, but at a lower rate (17%). It should be also noted that this increase refers to on organic growth as the acquisitions of subsidiaries contributed to the augmentation of the assets in a small proportion.
• After analyzing the banks’ Assets and Liabilities for the fiscal year 2009-2008, we found that the rate of loans to total assets increased by approximately (+6%), in comparison to the previous year rate, and reached a level of 65%. Along with in-vestments in securities, loans represent more than 80% of the bank’s total assets. At the same time, the client deposits and debt securities fund the banks total assets (over 60% and 10% respectively). While loans have increased, investments in securities presented a marginal decrease. In particular, the trading portfolio and other assets at fair value showed a marginal increase (of about 4%) while there was a reduction of (-14%) in the banks’ investment portfolio. The main causes behind these reductions were the significant liquidations of securities and, to a smaller extent, the loss that was incurred in the banks’ bond portfolio. Customer deposits which are the most important source of financing for banks grew at a lower rate than the growth rate of loans. The relative financial deficit was financed primarily by issuing new debt securities.
• An important outcome of the analysis of the Equity in 2009-2008, was that the Banks’ capital increased mainly due to important augmentations in equity instead of cash.
• Another important finding after analyzing the Profit and Loss Account of 2009-2008, is that in the fiscal year 2009, banks recorded an impressive increase in profitability with net profit after tax (more than 69%) in comparison to the previous period. Fac-tors that contributed to increased profitability are the increase of net interest income, as a result of loan growth, and the increased commission of bank and stock transactions. Moreover, it should be noted that several banks recorded significant financial profit after the liquidation of their investments. Profit was also recorded as a result a reduction in the creation of provisions for loans and a lower tax burden. Interest income remained the main source of income for banks. However, in the fiscal year, the contribution of financial results from financial transactions such as of investments’ valuations increased by + 1% and amounted to about 15% of total revenue. In terms of costs, organizational costs increase was less than the increase in total revenue, thus improving the efficiency ratio. The decrease in provisions during the year resulted in a reduction of the banks’ spending at a rate of about 15% of their total costs. Total operating expenses, as a percentage of revenues, decreased in the fiscal year 2009 compared to 2008, which indicates the efforts of banks to increase their functional efficiency. At the same time, in 2009, the banks formed a proportionate less provision for impairment. Thus, the ratio of loan impairment provisions to total revenue, compared with 2008, decreased approximately by 27%.
• By examining the results recognized directly in equity, we observed that, apart from earnings, equity was also reduced at the amount of profit and loss that is recognized directly in equity. The most important reduction derives mainly from the reversal of previous years' profits from investments, which was divested during the current year as well as from the valuation of relevant investment in the current fiscal year.
• The cash-flow analysis of 2009-2008 showed that, overall, cash for the fiscal year 2009 registered a significant increase compared to those of the previous fiscal year. Moreover, there were significant rearrangements in the headings of the Cash Flow Statements which show the progress of Greek banks as far as their investment, fi-nancial and functional activities are concerned. The cash deficit from operational activities is attributed mainly to the large increase in loans and to the lower relative increase in deposits. The flows from financial activities increased significantly mainly as a result of the issuance of new debt securities. There was also a significant decrease in the total cash outflow from investing activities primarily due to significant disposals of securities of investment portfolios. Finally, Cash Flow Statements display a significant increase in the payment of dividends, which reflects the increased profitability of Greek banks.
• While analyzing the financial ratios of 2009-2008, we observed that the large in-crease in customer loans, together with a significantly smaller increase in customers’ deposits, resulted at a rate of about 12%. Similarly, there was an increase in the efficiency ratio of the total assets of listed banking groups (more than 38%) and equity (more than 38%).
• In accordance with IFRS 2, employee benefits based on equity securities must be evaluated at fair value on the grant date and must be recognized in income partially while providing the service to the employees. Banks’ net profit after taxes were charged about 3% from the application of IFRS 2. In 2009 several banks were run-ning stock option programs to their staff. Regarding the providing of necessary dis-closures as required by IFRS 2, to enable users of financial statements to under-stand the basis of measurement of expenses, it is observed that, in general, banks have complied with the relevant provisions.
• The requirements of IFRS 3 demand the recognition of almost all intangible assets of a bank that is acquired separately from its goodwill. During 2009, the majority of banking groups identified intangible assets thus presenting goodwill in their balance sheets. Also in the same fiscal year, there were some acquisitions which resulted in goodwill. In general, the banking sector complied with the requirements of the IFRS and provided adequate information regarding these acquisitions. Banks should perform an impairment test of their goodwill assets on a year basis. They should also include the factors used for calculating the impairment of goodwill especially as far as the creation of cash flows, the weighted average growth rate and their operations is concerned. Most of the banks that have recognized goodwill comply with these disclosures.
• After studying the application of IAS 27-28-31, we came to the conclusion that all listed banks prepare consolidated financial statements. However, it was observed that a very small number of banks did not incorporate all their subsidiaries but they excluded those that had minor impact. The majority of banking groups have invested in affiliated banks, which are incorporated with the equity method. Investments in associates for the year 2009, presented a decrease compared to the year 2008, as a result of the clearance sale of major investment outside the financial sector.
• An analysis of the implementation of IFRS 5 showed that there was a significant decrease of assets categorized as “kept for sale” in the period ending in 2009 and the corresponding reduction in obligations of non-current assets was mainly due to the clearance part of their business from banking groups. The details of these activities were classified as held for sale since 2008 but the sale was completed in 2009. A small number of banking groups presents discontinued operations in their financial statements and the corresponding results from discontinued operations represent approximately 7% of total profits after tax of these banks.
• As demonstrated by the aforementioned analysis, IFRS 32 & 39 are the major ac-counting standards for banks. Listed banking groups have all investment categories listed in IFRS 39 and apply hedge accounting. IFRS 7 has a significant contribution to the quality of information as the financial risks of banks are concerned. About 70% of financial assets, apart from requirements, relate to items evaluated at fair value through the profit and loss account, 24% of assets evaluated at fair value and recognized in equity (available-for- sale), while the rest of the data is measured at amortized cost (investments held to maturity). The disclosures in the financial statements show that the minimum amount of banks has no investments in assets at their fair value through profit and loss account, while the majority of these are investments available for sale and held to maturity. During the fiscal year 2009, banks recorded earnings from the valuation and trading assets at fair value through profit or loss in an extremely increased rate compared with 2008.
• By analyzing the application of IFRS 7 we found that, in general, banks have com-plied with the requirements of the standard regarding their exposure to financial risks, although several areas requiring improvement have been identified. Findings on the adequacy of such disclosures by risk category are:
i)Liquidity risk: The total number of banks presents a chronological analysis of the maturity of its obligations, as well as a brief description of how to manage liquidity risk. However, only half of the banks have complied with the new requirements of the Standard regarding the presentation of maturity based on the total future contractual payments on an undiscounted basis. In contrast, the remaining banks used accounting discounted values for the relevant disclosure.
ii) Market risk: Information about banks' exposure to market risk was satisfactory.
iii) Credit risk: The adequacy of information was considered satisfactory in reference to credit risk except, perhaps the providing of information regarding fair value of loans that are in delay or impaired. Shortages also are emerging in the providing of information on claims which were settled in the fiscal year. Regarding the analysis of the credit rating of loans, it is noted that while all banks have an analysis, there were cases where banks had classified nearly all their loans into a single class or had marked a significant amount of loans to unrated. The quality of the information provided in this case requires significant improvements.
iv) Other disclosures: Most of the banks listed on the ASE, show evidence of the fair value of all-financial assets and liabilities.
v) Capital management: All banks present data on the management of the funds and their capital adequacy requirements under the requirements set in IFRS 7. It was found that the ratio of total adequacy in the year 2009 was higher than the institutional level, such that it enables most banks to adequately cover the increased activity in all sectors.
• From the analysis of the loan portfolio’s quality, it was found that the portfolio of Greek listed banks presents a decrease in the category of impaired loans, due to 2009 loan write-offs. It is reported that there were deletions in banks more than twice those in previous years. There was also a significant increase in total delayed non-impaired loans. The percentage of loans in arrears more than 90 days for which no provision was made presented a low percentage of the total portfolio, whereas there was great variation in the category of impaired loans. The percentage of non-performing loans for all banking groups in 2009 was lower by about 4 percentage points compared with 2008 mainly due to loan write-offs. We should mention that in this study as non-performing loans one could identify loans that are on delay for more than 0 days and the loans are impaired and may differ, from what the management of each bank considers right. Finally, an important change occurred in loan write-offs as a percentage of loans impaired write-offs for the year 2009-2008.
• As far as the results from the application of IAS 1 are concerned, the financial state-ments of banking groups for the year 2009, showed significant problems in terms of adequacy of references to financial data of the balance sheet and Profit and Loss Statement. However, some banks do not provide sufficient information on the as-sessment made by the authorities in the process of preparing its financial state-ments.
• An analysis of IAS 12 showed that for the year 2008, the rate of recognition of de-ferred tax assets were extremely high and nearly triple in size compared with the corresponding tax liabilities. This rate fell dramatically in 2009. This decrease is due to the additional recognition of deferred tax liabilities. A significant proportion of the deferred tax liabilities in respect to corresponding taxes on intangible assets arose from the acquisition of banks in accordance with IFRS 3. The most significant causes for the recognition of deferred tax assets are the estimation of bad debts that have not yet recognized and the recognition of tax liabilities for retirement benefits to staff. While the deferred tax assets in 2009 was about equal to those of 2008, deferred tax liabilities appear in approximately 50% more than those of 2008. Despite the important decrease in the net liabilities (after the counterbalance), the problem on whether banks should counterbalance their tax assets with their tax profit in the foreseeable future still remains.
• By analyzing the application of IAS 16-17, we found that banks acquired tangible fixed assets through leasing contracts at marginal rates. In addition to loans and other core banking activities, banks have significant operations leasing activities. We examined the ratio of receivables from finance leases as a percentage of total receivables from customers and other loans and a significant increase over the comparative period of the leasing business in 2009 was shown, while the percentage of all the other requirements from customers were approximately 3% . A similar percentage was observed in year 2008. In conclusion, the demands on finance leases are still a small share of banks' business.
• The liabilities of banks due to the retirement of their staff, according to the study of the application of IAS 19, declined significantly during 2009, mainly due to allocation of these benefits to ETAT, which is a fund of predefined contribution plan.
• The degree of adequacy of disclosures, regarding transactions with related parties, as required by IAS 24, is generally satisfactory. All the Financial Statements include details of transactions with related parties, distinguished according to their relation-ship with each bank.
• An analysis of the implementation of IAS 37 and IFRS 4 found that, in general, the information provided on the provisions is limited as several banks avoid analyzing the nature of their provisions in the Financial Statements. Fewer deficiencies are found in the disclosure of provisions for insurance liabilities and charges. Provisions for tax audit differences as disclosed in the financial statements remained almost unchanged compared with the year 2008, while estimates for other risks not known in detail showed an increase (approximately 28%). Most banking groups have insurance sector, provide all disclosures for the management of insurance risks and in order to check the adequacy of insurance reserves undertaken.
• According to the application of IAS 33 it was found that the average of basic earn-ings per share of the banking group for the year 2009 shows an increase (+75%) and is in harmony with the significant increase in profitability over the same period. Several banking groups have no financial resources and are likely to cause a decrease in basic earnings per share. Therefore it is not required to provide relevant information for diluted earnings per share.
• Analysis of the implementation of IFRS 38 showed that the intangible assets that have come from local banks as a deposit base, customer relationships, distinctive titles, etc are the largest category of intangible assets, represent approximately 80% of their total value. Investment in software, which is the largest investments in intangible assets are also very important.
• Finally, the finding from the analysis of the implementation of IAS 40, is that all the banking groups hold investment property, most of which is evaluated at fair value. During 2009, banks resulted in profits of over € 100 million from the revaluation of properties at fair value. It should be noted, however, that an analysis based on data supplied by the banks themselves and some banks are likely to be recognized on profits, but not to show separately.
References:
1. International Accounting, by Frederick D. Choi, Gary K. Meek, Publisher: Prentice Hall; 7 edition (August 2, 2010)
2. Advanced Accounting, by Debra Jeter, Paul Chaney, Publisher: Wiley; 4 edition (December 9, 2009)
3. Advanced Accounting, Study Guide with Working Papers in Excel, by Debra Jeter, Paul Chaney, Paperback: 312 pages Publisher: Wiley; 4 edition (February 2, 2010)
4. Corporate Accounting: Theory and Practice, by Nirmal Gupta, Chhavi Sharma, Pa-perback: 714 pages Publisher: Global Professional Publishing (June 2010)
5. Financial Accounting & Reporting, by Barry Elliott, Jamie Elliott, Publisher: Prentice Hall; 13 edition (December 13, 2009)
6. Financial Accounting: IFRS, by Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, Hardcover: 848 pages Publisher: Wiley; 1 edition (May 24, 2010)
7. Financial Accounting, Study Guide: IFRS Edition, by Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, Paperback: 408 pages Publisher: Wiley; 1 edition (June 28, 2010)
8. Intermediate Accounting: IFRS Edition, by Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Hardcover: 688 pages Publisher: Wiley; 21 edition (July 20, 2010)
9. Intermediate Accounting: IFRS Approach 1st Edition Volume 1 and Volume 2 Set, by Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Publisher: Wiley (Septem-ber 17, 2010)
10. Applying IFRS for SMEs, by Bruce Mackenzie, Publisher: Wiley (May 3, 2010)
11. IFRS 2010: Interpretation and Application of International Financial Reporting Stan-dards, by Barry J. Epstein, Eva K. Jermakowicz, Πublisher: Wiley; Revised edition edition (February 5, 2010)
12. Understanding IFRS Fundamentals: International Financial Reporting Standards, by Yass A. Alkafaji et al, Paperback: 432 pages Publisher: Wiley (May 24, 2010)
13. Financial Statements: A Step-by-Step Guide to Understanding and Creating Finan-cial Reports, by Thomas R. Ittelson, Paperback: 288 pages Publisher: Career Press; Revised edition (August 15, 2009)
14. http://www.iasc.org.uk (Official site of the International Accounting Standard Board).
15. http://www.fasb.org (Official site of the Financial Accounting Standards Board).
16. Greek Law 2190 / 1920.
*Η κατωτέρω εργασία παρουσιάσθηκε σέ Διεθνές Ακαδημαϊκό Συνέδριο (ΙCABE 2010) στην Λα Κορούνια της Ισπανίας την Παρασκευή 10 Σεπτεμβρίου 2010.
Τρίτη 31 Αυγούστου 2010
Έναρξη Δραστηριότητας Ανδρέας Κουτούπης και ΣΙΑ EE - Εταιρεία Συμβούλων
Αγαπητοί Φίλοι
Από Σήμερα 1.9.2010 ξεκίνησε και επίσημα πλέον η δραστηριότητα της Εταιρείας Συμβούλων μου με σημαντικότερη εξειδίκευση τις Υπηρεσίες Εσωτερικού Ελέγχου (Assurance και Consulting) και την Επιμόρφωση Στελεχών Επιχειρήσεων. Η εταιρεία έρχεται να καλύψει τις απαιτήσεις των πελατών της μέσα από εκτεταμένες συνεργασίες με τους καλύτερους Ορκωτούς Ελεγκτές και Συμβούλους της Αγοράς.
Ανάλογα με το είδος του Έργου ή του εκπαιδευτικού σεμιναρίου συνεργαζόμαστε Ad-Hoc κάτω από την επίβλεψη του υποφαινόμενου με ΕΜΠΕΙΡΟΥΣ και ΕΞΕΙΔΙΚΕΥΜΕΝΟΥΣ Συμβούλους κατάλληλους για κάθε έργο. Επίσης, έχουν αναπτυχθεί συνεργασίες με μεγάλες Εταιρείες Ορκωτών Ελεγκτών κυρίως για τις Υπηρεσίες Assurance, όπου πάλι η Διαχείριση του Έργου θα γίνεται από εμένα.
Τι κερδίζει μια εταιρεία με την συνεργασία της με εμάς? Την μεγαλύτερη δυνατή σχέση κόστους / οφέλους, καθώς λαμβάνοντας ποιοτικές υπηρεσίες από συμβούλους με αρκετά χρόνια εμπειρίας πληρώνει μόνο μετά την επιτυχή ολοκλήρωση του έργου σε ένα κόστος 50-70% λιγότερο από μία Big 4 έχοντας ουσιαστικά πρόσβαση σε στελέχη με πολλά χρόνια εμπειρίας σε μεγάλες εταιρείες Ορκωτών Ελεγκτών. Άλλωστε, η μόνιμη διαμαρτυρία των πελατών στις Big 4 είναι η χρησιμοποίηση στα διάφορα έργα νέων άπειρων ελεγκτών και συμβούλων οι οποίοι ουσιαστικά μαθαίνουν την δουλειά στους πελάτες χωρίς πολλές φορές να έχουν την κατάλληλη καθοδήγηση.
Σκοπός της εταιρείας μας αναλυτικότερα είναι τα κατωτέρω:
- Η Παροχή υπηρεσιών εσωτερικού ελέγχου
- Η Παροχή υπηρεσιών αναγνώρισης, αξιολόγησης και διαχείρισης επιχειρηματικών κινδύνων
- Η Παροχή υπηρεσιών οργάνωσης (Κανονισμοί Λειτουργίας, Πολιτικές και Διαδικασίας) και αξιολόγησης πλαισίου εταιρικής διακυβέρνησης
- Η Παροχή υπηρεσιών μηχανογραφικής υποστήριξης υπηρεσιών εσωτερικού ελέγχου
- Η Παροχή λογιστικών - φορολογικών συμβουλευτικών υπηρεσιών προς επιχειρήσεις
- Η Παροχή υπηρεσιών λογιστικής επαλήθευσης
- Η Εκπόνηση οικονομοτεχνικών μελετών και επιχειρηματικών σχεδίων
- Οι Αποτιμήσεις εταιρειών
- Η Διενέργεια οικονομικών ελέγχων ειδικών αντικειμένων
- Η Διενέργεια ελέγχων απάτης
- Η Διοργάνωση επιμορφωτικών σεμιναρίων και εκπαίδευση προσωπικού επιχειρήσεων
- Η Παροχή υπηρεσιών προσλήψεων και αξιολόγησης ανθρώπινου δυναμικού
- Η Παροχή υπηρεσιών διαχείρισης ανθρωπίνων πόρων
- Η Παροχή υπηρεσιών γραμματειακής υποστήριξης
- Η Παροχή υπηρεσιών δακτυλογράφησης και μετάφρασης κειμένων.
Σύντομα θα τεθεί σε λειτουργία και η ιστοσελίδα μας στο Internet (www.andreaskoutoupisias.gr) στην οποία θα υπάρχει αναλυτική παράθεση των Υπηρεσιών μας, των προϊόντων μας και των συνεργασιών μας.
Για περαιτέρω πληροφορίες ή επεξηγήσεις μπορείτε να μιλάτε απευθείας μαζί μου στο 6946000968.
Φιλικά
Δρ. Ανδρέας Γ. Κουτούπης MIIA, PIIA, CIA, CICA, CCSA
Άνεξάρτητος Σύμβουλος Εσωτερικού Ελέγχου,
Ιδρυτής Ανδρέας Κουτούπης και ΣΙΑ ΕΕ
Από Σήμερα 1.9.2010 ξεκίνησε και επίσημα πλέον η δραστηριότητα της Εταιρείας Συμβούλων μου με σημαντικότερη εξειδίκευση τις Υπηρεσίες Εσωτερικού Ελέγχου (Assurance και Consulting) και την Επιμόρφωση Στελεχών Επιχειρήσεων. Η εταιρεία έρχεται να καλύψει τις απαιτήσεις των πελατών της μέσα από εκτεταμένες συνεργασίες με τους καλύτερους Ορκωτούς Ελεγκτές και Συμβούλους της Αγοράς.
Ανάλογα με το είδος του Έργου ή του εκπαιδευτικού σεμιναρίου συνεργαζόμαστε Ad-Hoc κάτω από την επίβλεψη του υποφαινόμενου με ΕΜΠΕΙΡΟΥΣ και ΕΞΕΙΔΙΚΕΥΜΕΝΟΥΣ Συμβούλους κατάλληλους για κάθε έργο. Επίσης, έχουν αναπτυχθεί συνεργασίες με μεγάλες Εταιρείες Ορκωτών Ελεγκτών κυρίως για τις Υπηρεσίες Assurance, όπου πάλι η Διαχείριση του Έργου θα γίνεται από εμένα.
Τι κερδίζει μια εταιρεία με την συνεργασία της με εμάς? Την μεγαλύτερη δυνατή σχέση κόστους / οφέλους, καθώς λαμβάνοντας ποιοτικές υπηρεσίες από συμβούλους με αρκετά χρόνια εμπειρίας πληρώνει μόνο μετά την επιτυχή ολοκλήρωση του έργου σε ένα κόστος 50-70% λιγότερο από μία Big 4 έχοντας ουσιαστικά πρόσβαση σε στελέχη με πολλά χρόνια εμπειρίας σε μεγάλες εταιρείες Ορκωτών Ελεγκτών. Άλλωστε, η μόνιμη διαμαρτυρία των πελατών στις Big 4 είναι η χρησιμοποίηση στα διάφορα έργα νέων άπειρων ελεγκτών και συμβούλων οι οποίοι ουσιαστικά μαθαίνουν την δουλειά στους πελάτες χωρίς πολλές φορές να έχουν την κατάλληλη καθοδήγηση.
Σκοπός της εταιρείας μας αναλυτικότερα είναι τα κατωτέρω:
- Η Παροχή υπηρεσιών εσωτερικού ελέγχου
- Η Παροχή υπηρεσιών αναγνώρισης, αξιολόγησης και διαχείρισης επιχειρηματικών κινδύνων
- Η Παροχή υπηρεσιών οργάνωσης (Κανονισμοί Λειτουργίας, Πολιτικές και Διαδικασίας) και αξιολόγησης πλαισίου εταιρικής διακυβέρνησης
- Η Παροχή υπηρεσιών μηχανογραφικής υποστήριξης υπηρεσιών εσωτερικού ελέγχου
- Η Παροχή λογιστικών - φορολογικών συμβουλευτικών υπηρεσιών προς επιχειρήσεις
- Η Παροχή υπηρεσιών λογιστικής επαλήθευσης
- Η Εκπόνηση οικονομοτεχνικών μελετών και επιχειρηματικών σχεδίων
- Οι Αποτιμήσεις εταιρειών
- Η Διενέργεια οικονομικών ελέγχων ειδικών αντικειμένων
- Η Διενέργεια ελέγχων απάτης
- Η Διοργάνωση επιμορφωτικών σεμιναρίων και εκπαίδευση προσωπικού επιχειρήσεων
- Η Παροχή υπηρεσιών προσλήψεων και αξιολόγησης ανθρώπινου δυναμικού
- Η Παροχή υπηρεσιών διαχείρισης ανθρωπίνων πόρων
- Η Παροχή υπηρεσιών γραμματειακής υποστήριξης
- Η Παροχή υπηρεσιών δακτυλογράφησης και μετάφρασης κειμένων.
Σύντομα θα τεθεί σε λειτουργία και η ιστοσελίδα μας στο Internet (www.andreaskoutoupisias.gr) στην οποία θα υπάρχει αναλυτική παράθεση των Υπηρεσιών μας, των προϊόντων μας και των συνεργασιών μας.
Για περαιτέρω πληροφορίες ή επεξηγήσεις μπορείτε να μιλάτε απευθείας μαζί μου στο 6946000968.
Φιλικά
Δρ. Ανδρέας Γ. Κουτούπης MIIA, PIIA, CIA, CICA, CCSA
Άνεξάρτητος Σύμβουλος Εσωτερικού Ελέγχου,
Ιδρυτής Ανδρέας Κουτούπης και ΣΙΑ ΕΕ
Τετάρτη 18 Αυγούστου 2010
Απαντήσεις στο Ερωτηματολόγιο του Προυστ για λογαριασμό του Blog Ηρακλειώτικο Στέκι
Δείτε http://irakliotikosteki.blogspot.com/2010/08/blog-post_4601.html
Κυριακή 25 Ιουλίου 2010
Audit Committees in the Greek banking institutions: A qualitative investigation of effectiveness
By Dr. Andreas G. Koutoupis MIIA, PIIA, CIA, CICA, CCSA,
Adjunct Lecturer,
University of the Aegean
Department of Business Administration
April 2010
1. Introduction
Recent corporate scandals, such as Enron and WorldCom, have focused the minds of governments, regulators, companies, investors and the general public on weaknesses in corporate governance systems and the need to address this issue (OECD, 2004:1)
Corporate governance issues have always been integral to business practices, beginning with the “agency problem” between corporations, owners, managers and the directors who represent the owners. However, Tricker (2000:xiii), calls the 21st century as the century of governance as concerns the shift from mechanisms of management to legitimacy and accountability in an era when corporate power has become global in its scope.
For over 20 years, a series of committees have been created of inquiry into the financial aspects of corporate governance in most developed countries. As a result, various reports with codes of best practices and recommendations have been emerged or implemented in an attempt to improve corporate governance mainly in the Anglo-Saxon world (Treadway Commission, 1987 and POB, 1993 in the US; Cadbury Report, 1992; Greenbury report, 1995; the Combined Code, 1999; Turnbull, 1999, Higgs Report, 2003 and the new Combined Code, 2003 in the UK).
In the past, the audit committee’s emphasis was on accurate financial reporting. Over the years, the audit committee’s function has expanded into oversight of internal controls and oversees the processes that monitor compliance with laws, regulations and the corporate code of conduct (Colley et al, 2005). However, and despite the prominent and extensive examples of new and tighter rules and guidance for audit committees and the overall audit process, corporate scandals have continued to shock the business community (Enron, Parmalat, Ahold, etc) and have led to serious concerns over the effectiveness of board of directors and audit committees and finally to enact reforms to improve the effectiveness of audit committees (BRC 1999; Sarbanes-Oxley Act, 2002). For example in the Enron case, the Powers report (2002) concluded that Enron’s board
…failed to monitor...and safeguard Enron’s shareholders.
Associated with the greater use of audit committees as a governance mechanism and given that their appointment is currently mandatory for Greek banks (Bank of Greece Governor’s Act: 2577), the author will try to shed light on the drivers that may lead to an effective audit committee (hereafter AC).
2. Audit Committees Effectiveness
“Codes of best practices”, stock exchange requirements, legislation and other guidelines were designed to meet the goal of “making audit committees more effective” (i.e. BRC, 1999:2). However, whether ACs’ are actually discharging their important responsibilities remains insufficiently understood. A serious concern exists over whether AC members are focusing more on procedural matters to protect themselves from liability than on improving their competence and effectiveness as a committee (U.S. General Accounting Office, 2003).
There is a definitional problem which pervades the AC effectiveness literature (Spira, 2002). Most of the best practices and regulations (BRC, 1999, SOX, 2002), as well as most of the researchers (Beasley 1996, DeZoort 1997), identified indicators such as:
Financial literacy,
Director independence and
Frequency of meetings as contributing to AC effectiveness.
Although these studies focus on important characteristics affecting AC performance, the purpose of AC activity and the criteria used to evaluate effectiveness are not clearly defined (Spira, 1998).
According to New Oxford Dictionary:
Effective means successful in producing a desired or intended result
Since the main purpose of the AC is to oversee the accounting, auditing and financial reporting process, effective AC may be defined as the success of AC’s oversight efforts. De Zoort et al (2002) offer the following definition.
However, effective oversight goes beyond mere compliance with the rules; it requires careful consideration of an AC framework that facilitates the coordination of activities and information needed to support the committee’s understanding and monitoring of a company’s financial reporting process (Terrell & Reed, 2003).
Cameron (1986) mentioned that the primary task facing any investigator of effectiveness lies in determining what are the appropriate indicators and measures and that effectiveness is a multidimensional construct. Additionally, many researchers have highlighted the potential validity of employing “soft” and “hard” measures in evaluating team performance (Higgs, 1999). In an earlier case study (Quinn & Cameron, 1983) concluded that major criteria of effectiveness change in predictable ways as organizations develop through their life-cycle. Consistent with Quinn & Cameron (1983), Spira (1998) suggests that audit committee effectiveness is clearly associated with evolution through time.
According to PWC (2003), systems, structure and processes are important indicators to audit committee’s success. Moreover:
2.1.1 Organizational systems, structure and operation
a. AC charter: Adoption and annually reassessing of a written charter, approved by the board, which describes the scope of activities, duties and responsibilities of the AC
b. Independent and qualified members: AC members must be independent, in fact and in appearance, without any “grey” areas compromising independency such as interlocking directorships, related-party transactions, lawyers receiving fee income and kinship relations. Additionally, membership should consist of both financial and non-financial members with a good mix of business judgment, banking experience and knowledge of social and cultural conditions of the country
c. Financial reporting expert with experience in GAAP and audits
d. Meetings and minutes, correspond with the major phases of the financial reporting, external audit and internal audit cycles with a detailed written agenda and adequate supporting papers highlighting matters for decision. When needed, separate meetings should be arranged with senior management, internal and external auditors.
e. Induction and orientation of new members regarding industry matters, entity’s business matters, as well as internal auditing and external auditing matters.
2.1.2 Financial reporting, risk assessment & internal control
f. Review risk assessment process and risk mitigation action plan with details of the bank’s potential fraud, compliance and operating risks.
g. Review and discuss the implementation of key accounting policies and financial reporting and evaluate the overall effectiveness of the internal control and financial, operational and compliance risk management framework.
h. Reinforce a strong “control culture”
2.1.3 Internal and external audit
i. Review and evaluate the objectives, plans and policy of the internal audit department
j. Review the organizational structure, the quality and the effectiveness of the internal audit function
k. Review the operational activities of the auditing staff in the context of achieving their goals and objectives
l. Consider the independence of the external auditors
m. Review the audit plan and the scope of work
n. Review the qualifications, performance and compensation of the external auditors and make recommendations for their appointment
The following figure concludes that internal and external auditors’ effectiveness is associated with AC effectiveness.
In addition, ACs must ensure that they continuously improve their oversight role. Moreover, the AC should reflect and assess its overall operating performance and that of each AC member (PWC, 2003). As an example ACs might benchmark their performance against their formal written chapter (Braiotta, 2002). Continuous education of directors is also an important factor. Tailored workshops with modules led by management, internal audit, external auditors and in-house or external counsel are deemed essential in the continuous education process (PWC, 2003).
Corporate accountability has always been very important and stakeholders rely on the BoD to ensure it. Investors’ activism and stakeholder demands have resulted in numerous proposals for corporate governance reforms in the international environment. Board monitoring and the need for more accountability have been central in most of these reforms.
ACs’ have a critical role to play within the framework of corporate accountability. Initially, it was the Anglo-Saxon environment that supported their establishment followed by a growing global acceptance associated with directors’ conformance and performance roles.
There is no doubt that the role of the AC in banks is of special importance and of particular complexity. Vast sums of money and other financial assets and information are in constant motion, therefore internal controls are unique and singularly difficult. In addition, the technology used in the business is becoming increasingly sophisticated and complex. Given the complexity of those issues, the effectiveness of ACs in banks is of far more greater importance.
In the Greek business environment, ACs are mainly responsible for the monitoring the financial reporting process. The socio-cultural values and forces (high uncertainty avoidance and collectivism) in Greece explain, to a large extent, the legal compliance aspect of corporate governance rather than initiatives derived from business and may affect the performance and decision-making processes (group think). The question of whether AC framework should be left to be determined by free market forces or the regulator framework is a difficult one.
Risk management in Greek banks demonstrates that no systematic approach concerning identification, evaluation and management of risk is followed, while on the other hand seems that the majority of companies are able to identify the main risks that characterize them, however without following specific procedures as a means to secure accuracy and completeness of the identified risks.
3. Research Methodology
The author has decided to choose the “interpretivism” research philosophy in order to enter the social world of ACs and understand their world from their point of view (Saunders et al, 2006). Qualitative research is one of the two major approaches to research methodology in social science. Qualitative research involves investigating participants' opinions, behaviours and experiences from the informants' points of view. These criteria play an important role for the research topic since people involved in ACs will be the centre of attention when gathering data.
The focus of this work will be on exploratory and descriptive research, mapping the field and providing a structured approach to the issue. Multiple cases (Yin, 2003) research strategy has been chosen by the author mainly because case studies:
Have the potential to provide better understanding of accounting practice (Hopwood, 1987)
May be used to gain insight of the role and functioning of ACs in organizations and to compare the claimed potential of ACs with its practical achievements and consequences (Power, 1997)
Generalize the findings and reduce the impact of any corporate culture bias (Yin, 2003).
Therefore, the planned study was based on five Greek banks mainly due to the fact that:
Those banks represent the five highest market capitalization Greek banks in the ASE (closing date 12Sep2007)
access to audit committee members and others involved in the AC work could be assured
A non-probability purposive sample (Saunders et al, 2006) of thirteen (13) individuals who have current experience with ACs has been chosen by the author since purposive samples are often used in case study research strategies (Newman, 2000). According to Patton (2002), the selected interviewees are critical since
If it happens there, it will happen everywhere
Two groups of interviewees were chosen in order to add value to the project.
Internal auditors and ACs members
External auditors from Big Four public accounting firms who are directly involved in auditing the aforementioned banks.
Interviewing all categories of people involved in ACs offered a rounded picture and some opportunity of checking data validity (Spira, 1998) and can be regarded as data-triangulation (Denzin, 1989).
Prior to the interviews, a list of interview themes about activities and effectiveness of ACs has been sent in advance (10 days) to those that would be interviewed. Those themes were based on the theoretical and conceptual framework and provided a focal point for the interview without restricting dialogue and have been focused around:
Organization and authority of the audit committee
Members qualification, background
Information nature and meetings process
Oversight of Internal control and risk management systems
Relationship with external, internal auditors and management
Assessing AC performance
Providing interviewees with this information before the interview promoted validity and reliability by enabling them to consider the information being requested and allowing them the opportunity to assemble supporting organization documents from their files (Saunders et al, 2006:320).
Prior to the interviews, and in order to support interview data and enhance reliability, the author collected the following documentary secondary data.
Table 3: Overview of the data collected prior to the interviews
BANK 1 BANK 2 BANK 3 BANK 4 BANK 5
Documents AC Charter - AC Charter - -
Annual report Annual report Annual report Annual report Annual report
All face-to-face, semi-structured and one-to-one interviews were carried out between October and November 2007 at the offices of the interviewees. Initially, it was the author’s hope that an agreement to observe an AC meeting could be negotiated. However, Chairmen of the board were reluctant to allow this for confidentiality reasons.
Three (3) interviews were carried out with AC members (one of them was an AC chair), six (6) interviews with internal auditors (two of them were CAEs) and four (4) interviews with external auditors (one partner and three managers).
Figure 7: Interview participants’ roles in the banks
All interviews were conducted in Greek by the author customized the interview instrument for each category of interviewees. Both open and closed questions have been used followed by probing questions in order to explore responses that were of significance to the topic. However, and although there was a full set of questions in the instrument, the author did not ask all the questions and used the instrument in order to guide the interviews.
The interviews with internal and external auditors were tape-recorded. The interviews with the AC members were not tape-recorded since it was felt that, if they were, they would be less likely to discuss sensitive issues. All interviews lasted from 60 to 90 minutes.
The following table presents the interviewee’s role in each bank.
Table 4: Overview of the interviewee’s role in each bank
BANK 1 BANK 2 BANK 3 BANK 4 BANK 5
Interviewees ACC IA ACM CAE ACM
EA EA CAE EA IA
IA - IA - EA
The author emphasized that complete anonymity would be provided to all and to their perspective organization and no other organization member would examine the interview transcript.
By the end of the interview, respondents indicated that they could not think any additional items that might be important in the research.
The first step was to transcribe the interviews word by word and send them to the interviewees for approval. Then all interview transcripts were analyzed based on the analytical protocol recommended by Miles & Huberman (1994) and significant words or phrases were highlighted. Then, the author coded all interview transcripts according to the topics extracted from the interviewees’ answers as well as the conceptual framework presented in 5.1. This process enabled the author to easily drawn upon all things said on each specific topic by all the interviewees.
The four topics of AC effectiveness derived from the interviews are as follows:
1. AC Policy framework
2. AC members profile
3. Informational and Operational practices and procedures
4. Accountability process
The following sections present the aggregation of the answers of the thirteen interviews conducted on the topic of AC effectiveness in the Greek banking institutions as well as the analysis of the documents mentioned in Table 4. The results are presented by topic followed by a short discussion of the most important aspects.
4. Research Findings
4.1 AC Policy framework
The analysis of the documents collected by the author indicated that in the majority of the cases (80%) there is a written AC charter approved by the BoD. However, interviews revealed that only two of the sample banks (Bank 1 & 3) are annually re-assessing their AC charter and only one bank informs stakeholders about its AC Chapter through its internet site (Bank 1). Table 5 below expounds the data from the analysis.
Table 5: AC Charter in Greek banks
The set of questions related to AC Charter was to shed light in the content and context of the charter. A key focus here is to assess whether there is clear term of reference which can highlight the responsibilities and authority of the AC.
The audit committee members-participants were of the opinion that they have a clear reference guide to their responsibilities based on the new legislation (ΒοGA/2577) although argued that the existence of a written charter is an additional constituent of effectiveness. Although AC members felt that they have clear terms of reference through their charter, with the exception of Bank 5 where there is no AC charter yet, the interviews with internal and external auditors’ evidence that AC members are unaware of their objectives and scope of work as a committee. Internal and external auditors felt that their scope of work is restricted overseeing external audit function and review of banks financial statements.
4.2 AC members’ profile
In order to uncover the “quality” of AC members, the interviewees were asked about the selection, orientation and training processes as well as financial expertise and banking sector knowledge of the AC members.
Members’ appointment & independence
The ΒοGA/2577 declares that ACs’ should be composed of non-executive directors with at least one independent member.
The analysis of the secondary data (banks’ annual reports) revealed that all ACs in the sample comply with the definition of independent directors as specified in Law 3016 (Corporate Governance Law). However, only Bank 1 (20%) complies with BRC (1999) which specifies that AC’s should comprise only with outside and independent directors. The main reason seems to be that Bank 1 is listed in NYSE therefore should comply with SOX (2002).
Additionally, and contrary to what is being mentioned to the majority of the AC charters regarding nomination process, interviews revealed that the Chairman of the BoD is proposing a new member to the General Assembly and the shareholders are handling the process in a “rubber-stamp” approach.
The majority of the external and internal auditor partners (70%) agreed that AC members’ independence seems to be the major handicap on the role of ACs and it is based mainly on the nomination process of new AC members
Table 6: AC Members independence in Greek Banks
Induction, orientation and training
Surprisingly, none of the banks (100%) had a formal induction process, orientation and training processes for new AC members although AC interview partners recognize that AC member’s personality is the most important driver for orientation in a new appointment.
However, with the lack of a formal induction process most directors come to ACs assuming what the job is, since they sometime have experience in other boards. Most of the EA and IA interview partners argued that the selection and orientation processes are two of the major handicaps in AC effectiveness.
Qualifications & background
Regarding qualifications of an effective AC member, the following statement sums up well what all interviewees believe to some extent that members’ competence, diligence and independence are key drivers of effectiveness.
Frequently during the interviews, the AC interview partners argued that their extensive financial and auditing background is contributing to AC effectiveness.
The external auditors were argued that the new Governor’s Act (2577) was the driver for the change. One EA (Bank 5) commented as follows:
Traditionally, one of the major weaknesses of the ACs of Greek banks was that its members were not qualified in auditing and or accounting and therefore there were not qualified to carry out their role effectively. However, with the new legislation, banks demonstrated an immediate response to the new requirements.
Table 7: Overview of interview AC members’ background
BANK 1 BANK 3 BANK 5
Interviewee ACC ACM ACM
Background Degree in Finance; MBA;
Prior Senior Partner in one of the Big 8 accounting firms;
ACCA member Degree in Economics;
Twenty five years of experience as a Lead auditor; CIA;
Currently business consultant Degree in Law; Strong experience as an auditor;
Currently CEO of an investment company
Associated with the members’ background it appears that competencies, skills and expertise may generate feelings of self confidence and thereby possibly affecting the performance of members during meetings.
4.3 Informational and Operational practices and procedures
The objective is to shed light on the information protocols between ACs’ and management, internal and external auditors as well as the practices during AC meetings.
Agenda
An important factor affecting the effectiveness of ACs in Greek banks according to the interviews is the quality of information provided to them. ACs rely on receiving “the right information at the right time” (ACM, Bank 5) from CFO as well as the external auditors.
The benefits of highly scheduled and structured meetings with an agenda sent in advance to members are clearly defined by IAs. The interview evidence suggested that in all banks, the agenda is sent to the members along with previous minutes well in advance to the meeting. However, in Bank 1 the CEO (also Chair the BoD) agrees the agenda with the ACC, while in banks 3 and 4 the agenda is prepared using a schedule of routine activities (in accordance with statutory reports and accounts) and in banks 2 and 5 the agenda is prepared mainly by the IA in accordance with prior agendas and minutes.
The following table presents some documentary and logistical features of AC meetings in the Greek banks.
Table 8: Documentary and logistical features of meetings as reported by interviewees
Issue BANK 1 BANK 2 BANK 3 BANK 4 BANK 5
Preparation of Agenda Prepared by the CEO and agreed with Chair Prepared by IA Prepared by Chair Prepared by Chair Prepared jointly by IA and EA
Information sent to members prior to the meeting YES; minutes of prior meeting; reports from IA & EA; Agenda YES; reports from IA & EA; prior minutes of meeting; Agenda YES; prior minutes of meeting; Agenda; YES; Agenda; Reports form IA & EA; prior minutes of meeting; YES; Agenda; prior minutes of meeting;
Meetings
Meetings have been a source of some surprise since almost each bank had a different approach. The interviews identified the irregular pattern of AC meetings. All ACs in the sample meet the legislative requirement that should meet at least four times per year. However, there is a range from 4 meetings/year, up to 16 meetings /year.
Table 9: AC Meetings /year
Meetings participants
With the exception of Bank 1“…Our agenda is driving the attendance at the meetings (ACC)” and in regards to the attendance in meetings, it was clear from the interviewees that AC meetings are almost “isolated” from “external” partners such as senior management and external auditors. Sometimes the CFO is attending AC meetings and most of the audit committee members interviewees said that the presence of the CFO undermine the AC’s “control” of the meetings.
All the external auditors’ interviewees indicated that attendance in every AC meeting will assist is ensuring an effective working relationship between AC and external audit. The EA (Bank 4) commented on that in the following way:
I see the AC as a bridge between management and EAs’ therefore we strongly recommend to the AC to regularly attend some of the meetings. Although AC members have the experience, we can assist them to ask management the relevant questions. However, we rarely attend AC meetings and when this happens is usually before the disclosure of the proxy statement.
However, informal meetings with external auditors are very common. The ACM (Bank 5) mentioned:
I know well the partner of our auditors since we have known each other for more that 20 years. Every couple of months we go out together, have lunch and informally discuss several issues regarding the effectiveness of our controls, the risks we face, etc
In the same path, with the exception of Banks 1 and 3, the IAs had little possibility in attending AC meetings mainly since the internal audit profession is relatively new in Greece and the potential value derived from its operation is not clearly evident. As an IA (Bank 2) clearly stated:
We have to strengthen our perceived role regarding ACs. We need to devote more time in promoting our work with more focused reports in order to be able to attend meetings
Additionally, all banks do not disclose in their proxy statement the number of meetings annually as well as the names of ACMs’ who attended the meetings.
Oversight of internal control system and internal audit
According to the existing AC charters, all ACs (100%) in the sample banks, have a duty to review and monitor the effectiveness of internal control system and especially those policies, procedures and accounting system related to financial reporting. However, interviews revealed that only the 40% of the banks have formal processes in reviewing risk management and internal control systems.
Table 10: Review of the risk management & control systems
According to the AC Charter 100%
Existence of formal processes for reviewing 40%
Here, the interviewees rely on particular documents that ensure the existence of a risk management process throughout the banks. In one case there is a bi-monthly report and in the other case there is a certification by the business units. However, and despite the existence of code of conducts, most of the IAs claimed to be concerned with the culture and the corporate behaviour. The “tone at the top” was the issue of concern.
In all cases (100%) there is an Internal Audit Charter containing a written scope and objectives within. However, only in Banks 1 and 3 (40%), the IA Charter is approved by the AC. According to many IAs’ this charter usually contain the department’s chart, purpose and responsibilities.
Table 11: IA Charter
Existence of an IA Charter 100%
IA Charter approved by the AC 40%
The analysis of the interviews indicates that internal audit departments typically report to the AC and they have an annual internal audit plan but in most of the cases the departments didn’t have the relevant human resources to achieve the plan mainly due to competency and objectivity reasons.
External auditors’ interviewees also believe that IAs do not posses the necessary skills and competencies in order to add value to the organization they serve.
Another important finding was related to the internal audit reports. The analysis indicated that the majority of reports are not user friendly, since they contain much information which is not useful for the audit scope and purpose. There is also lack in the ranking of the audit findings (e.g. significant, major, minor, etc.) as well as no link with the potential risks. However, all ACMs interviewed, mentioned that they pay careful attention to the extent to which management adopt measures to solve any issues raised during the internal audit reports.
Another major issue derived from the analysis is that almost all ACs do not involve in appraising the quality of IA staff. With the exception of appointment and replacement of the CAE, ACs have not developed and implemented performance measures for the accomplishment of IA tasks. Only in banks 1 and 3 there are periodic quality reviews of IA departments taking place by independent third parties that certify the adequacy of the organizational system of internal controls and also the appropriateness of internal audit services.
Oversight of external audit
The focus here is to ascertain how the AC maintains the integrity of the audit process and the independence of the external auditor. According to the existing AC charters, all ACs in the sample banks, have a duty to monitor the selection and evaluate the performance of external auditors.
However, interview evidences that the interaction between external auditors and the AC is limited to monitor the financial-reporting process. Moreover, in all cases (100%), appointment and remuneration of external auditors seems to be a matter of senior management and especially the CFO and the AC sometimes is only informed about the audit firm. Additionally, any approvals for a change in auditors would come from the executive management and especially the CFO.
In addition, in all cases (100%), ACs require only an explanation from the CFO if there is an increase in audit fees and most of the times, ACMs are not aware for any non-audit fees. As an example in Bank 2, the audit firm is providing a numerous of non-audit services such as tax consulting, project management in various projects e.t.c. The Greek Corporate Governance related regulation (L.3016) does not totally prohibit the conduct of non-audit services by the same audit firm.
Most audit committee members and external auditors indicated that they meet with each other approximately two to three times per year although there are some cases such as Bank 1 where there are informal meetings between ACC and the partner of external audit firm. The most common issues discussed during the meetings are related to the audit plan, containing a summary of the audit scope, as well as audit findings. Interviews indicated that:
There are no formal discussions between external auditors and the AC in regards to any disagreements between external audit and management and
The relationship between external auditors and the AC is not interactive and seems to be a one-way process since auditors are presenting significant audit findings.
Interviews revealed that, with the exception of Bank 1, there is no formal process for the evaluation of the audit firm. The ACC (Bank 1) illustrated this in the following way:
Table 12: Evaluation of the external audit process
According to the AC charter 100%
Existence of a formal evaluation process 20%
4.4 Accountability process
The objective of this part is to shed light on how the BoD assesses ACs’ operating performance. A key focus here is to assess whether there is an annual action plan and a clear quality assurance plan in order to ensure the effectiveness and efficiency of the aforementioned oversight input and processes which, in turn, lead to a high level of assurance of the BoD’s corporate accountability (Braiotta, 2004).
In Greek banks’, AC evaluation is required by the Governor’s Act 2577. Evaluations should occur by external auditors every three years and ACs’ are evaluated as a part of the overall bank’s control environment.
However, the interviews evidence that in all (100%) cases ACs’ receive the results from the evaluation and do not have a system in place to implement those recommendations. In parallel, ACs’ do not have a system in place to self-assess their performance. Moreover, ACs’ do not have an annual action plan and they do not benchmark a performance review against their AC charter.
5. Conclusions and Recommendations
Interviews exposed that ACs’ are not evaluating their performance and the lack of this evaluation is a significant barrier for improving internal governance and external accountability. ACs and individual members’ performance evaluations represent a valuable opportunity to assess both strengths and weaknesses and evaluate AC’s role and contribution on corporate performance and conformance.
Therefore we can conclude that there is a gap between the theoretical and conceptual framework and field research. In order to ensure accountability, ACs should evaluate their performance on a regular basis (annually) through self-assessments and with the assistance of an external facilitator such as the external auditor. The results of the assessment should be communicated to the BoD and the stakeholders and should be accompanied with an action plan to respond in the identified areas for improvement.
Consequently, the following key driver may be suggested:
Key driver Attributes of effectiveness
Measuring and Improving Performance Develop an assessment framework (i.e a Balanced Scorecard) to improve the accountability process
Interview evidence and discussion presented above, highlighted a number of concerns as to the operational efficiency of the ACs in the Greek banks, although we may conclude that the policies and procedures concerning the AC framework are partially adequate and present a direction for compliance with best practices. However, it is their implementation that can be considered neither effective nor efficient. As such, an “expectation gap” exists between what ACs are expected to do and what they actually do.
This “gap” is possibly associated with the Greek cultural and social framework (uncertainty avoidance, collectivism, passive behaviour from investors, e.t.c.) as well as what Spira (1998) defines as an “infant” stage of evolution.
It is generally acknowledged that it is difficult to address cultural and social issues through a procedural framework. Additionally, as noted in the literature, in high uncertainty avoidance societies, there is a clear tendency for regulatory compliance and organizational legitimacy. Hence, and perhaps reflecting the paramount role of the state in high uncertainty avoidance societies, it is suggested that any mechanisms for improving both the adequacy of AC policies and procedures and their effective implementation, should rely on a relevant enhancement of the AC regulation.
In particular, it is further suggested that the existing regulation may be enhanced, providing sufficient or detailed guidance on the following:
i. The content of the AC charter
ii. The selection/recruitment and induction processes of AC members
iii. The informational and operational routines (i.e. an implementing framework to assess the adequacy of effectiveness and efficiency of the System of Internal Control, combined with auditing and assurance standards such as COSO and GAAS, respectively)
iv. The accountability criteria and processes
Given the fact that ACs’ in the Greek banks are in their “infant” stage and would encounter difficulties with a detailed guidance, the provision of “comply or explain” should be allowed, at least at the early stages of development.
In order for such a mechanism to lead quickly to what Spira (1998) describes as “mature stage” of AC development, it is necessary to be coupled by appropriate disclosures by the financial institutions. The latter on one hand would enhance compliance with the said regulation through market discipline, and on the other hand it would enhance investor activism.
Reference List
American Assembly 1978, Corporate Governance in America, Pamphlet 54. New York, USA: Columbia University
American Bar Association 1980, Committee on Corporate Laws: The Overview Committee of the Board of Directors, Business Lawyer, 35: 1335-1364
American Institute of Certified Public Accountants (AICPA) 1978, Audit Committees: Answers to Typical Questions about their Organization and Operations. New York, USA, American Institute of Certified Public Accountants
American Institute of Certified Public Accountants (AICPA) 1993, Meeting the Financial Reporting Needs of the Future: A Public Commitment from the Public Accounting Profession, New York, USA, American Institute of Certified Public Accountants
Bank of Greece 2002, Governor’s Act GA/2494/5.6.2002, Athens, Greece, Bank of Greece
Bank of Greece 2006, Governor’s Act GA/2577/9.3.2006, Athens, Greece, Bank of Greece
Barrett, M.J. and Tiessen, P. (1989) ‘Organizational Support for Internal Auditing’, Internal Auditing, v.5, n.2, Fall: 52-53
Basel Committee on Banking Supervision 2006, Enhancing corporate governance for banking organizations, Basel, Switzerland, Bank for International Settlements
Bavly, D. (1999) Corporate Governance and Accountability: What role for the regulator, Director, and Auditor?. Westport, CT, USA: Greenwood Press
Bean, J.W. (1999), ‘The Audit Committee’s Roadmap’, Journal of Accountancy, Jan.1999:47-54
Beasley, M.S. (1996), ‘An Empirical Analysis of the Relation between the Board of Director Composition and Financial Statement Fraud’, The Accounting Review, v.71:443-465
Bishop, W.G., Hermanson, D.R., Lapides, P.D. and Rittenberg, L.E. (2000), ‘The year of the audit committee’, Internal Auditor, 57:46-51
Blanchard, D. and Dionne, G. (2003) Risk Management and Corporate Governance. HEC Montreal Working Paper 03-04. HEC Montreal, Canada (Presented at the workshop “The Crisis of Corporate Governance: What’s next?” organized by M.Renaud, president of the Social Sciences and Humanities Research Council of Canada, as part of the Montreal Conference, held on 7 May 2003)
Blue Ribbon Committee (BRC) 1999, Report and Recommendations of the Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees, New York, New York Stock Exchange and National Association of Securities Dealers
Boyd, C. (2004), ‘The structural origins of conflicts of interests in the accounting profession’, Business Ethics Quarterly, v.14, is.3:377-398
Braiotta, L. Jr. (2002), ‘Corporate Audit Committees: An Approach to Continuous Improvement’, CPA Journal, v.72, n.7.
Braiotta, L. Jr. (2004) The Audit Committee handbook, (4th ed.). USA: Wiley
Brilliant D. (1995), ‘Tone at the top’, The Banker, Nov.1995, vol.145
Buckley, A. and Van Der Nat, M., (2003) ‘Derivatives and the non-executive director’, European Management Journal, v.21, issue 3:389-397
Buehler K. and Pritsch G. (2003), ‘Running with risk’, The McKinsey Quarterly, n.4
Business Roundtable 1990, Corporate Governance and American Competitiveness, New York, USA, The Business Roundtable
Business Roundtable 2005, Principles of Corporate Governance, New York, USA, The Business Roundtable
Cadbury Report 1992, Report of the Committee on the Financial Aspects of Corporate Governance, available at URL: http://www.ecgi.org/codes.
Cameron, K., (1986), ‘Effectiveness as paradox: Consensus and conflict in conceptions of organizational effectiveness’, Management Science, v.32, n.5: 539-553
Carcello, J. V. and Neal, T.L. (2000), ‘Audit Committee composition and Auditor reporting’, The Accounting Review, (October):453-467
Carcello, J.V., Hermanson, D.R., Neal, T.L., and Riley, R.Jr., (2002) ‘Board characteristics and audit fees’, Contemporary Accounting Research, (Fall):365-384
Carcello, J. V. and Neal, T.L. (2003), ‘Audit Committee characteristics and auditor dismissals following new going concern reports’, The Accounting Review, (January):453-467
Cohen, J., Pant, L., Sharp, D., (1993), ‘Culture-Based Ethical Conflicts Confronting Multinational Accounting Firms’, Accounting Horizons, v.7, n.3:1-13
Cohen, J., Krishnamoorthy, G. and Wright, A. (2002), ‘Corporate governance and the audit process’, Contemporary Accounting Research, (winter):573-594
Colley J. Jr., Doyle, J., Logan, G. and Stettinius, W. (2005) What is Corporate Governance. USA: McGrew-Hill
Collier, P.A. 1992, Audit Committees in Large U.K. Companies, London, UK, Research Board of the Institute of Chartered Accountants in England and Wales (ICAEW)
Collier, P.A and Zaman, M. (2005) ‘Convergence in European Governance Codes: The Audit Committee Concept’, Corporate Governance: An International Review, v.13, n.6: 753-768
Combined Code (The) 2000, Principles of Good Governance and Code of Best Practice, London, UK available at URL: http://www.ecgi.org/codes
Committee of Sponsoring Organizations of the Treadway Commission (COSO) 1992, Internal Control-Integrated Framework, New York, USA, Committee of Sponsoring Organizations of the Treadway Commission, available at URL:http://www.coso.org/publications
Dallas, G. (2004) Governance and Risk. USA: McGrew-Hill
Darden, C., and Pech, R., (2006), ‘The increasing cost of corporate governance: decision speed-bumps for managers’, Corporate Governance, v.6, n.1:84-95
Dechow, P. W., Sloan, R.G. and Sweeny, A.P., (1996), ‘Causes and Consequences of earnings manipulation: an analysis of firms subject to enforcement actions by the SEC’, Contemporary Accounting Research, 13(10):1-13
DeFond, M.L. and Jiambalvo, J. (1991), ‘Incidence and Circumstances of Accounting Errors’, Accounting Review, v.66, n.3:643-655
De Jong, E. and Semenov, R. (2002), ‘Cross-Country Differences in Stock Market Development: A Cultural View’ available at URL: http://www.ssrn.com
DeMarco, P., and Duffie, D., (1991), ‘Corporate financial hedging with proprietary information’, Journal of Economic theory, v.53, is. 2:261-286
Demb, A. & Neubauer, F.F. (1992) The corporate board: Confronting the paradoxes. New York, USA: Oxford University Press
Denzin, N. (1989) The Research Act: A Theoretical Introduction to Sociological Methods (3rd ed). NJ, USA: Prentice Hall
DeZoort, F.T. (1997), ‘An Investigation of audit committees’ oversight responsibilities’, Abacus (September):208-227
DeZoort, F.T., Hermanson, D.R, Archambeault, D.S., and Reed, S.A. (2002) ‘Audit Committee Effectiveness: A Synthesis of the Empirical Audit Committee Literature’, Journal of Accounting Literature, v.21:38-75
Dickson, M. (2003) ‘Higg’s bold shift in the board balance of power: welcome report of non-executives’, Financial Times, 21 January 2003
Dionne G. and Triki T. (2005), Risk Management and Corporate Governance: The importance of independence and financial knowledge for the board and the audit committee. HEC Montreal Working Paper no 05-15. Department of Finance and Canada Research Chair in Risk Management, HEC Montreal, Canada
Donaldson, M. (2000) Harvard Business Review on Corporate Governance, USA: Harvard Business School Press,
Ernst & Young (2004), Audit Committees Survey: Banking and capital Markets Firms, Ernst & Young LLP
European Commission 1996, Green Paper-The role, position and liability of the statutory auditor in the European Union, Brussels, Belgium, Commission of the European Communities
European Commission 2004, Proposal for a Directive on Statutory Audit of Annual Accounts and Consolidated Accounts, Brussels, Belgium, European Commission
Fama, E.F. (1980), ‘Agency problems and the theory of the firm’, Journal of Political Economy, 88: 288-307
Felo, A.J., Krishnamoorthy, S., Solieri, S.A. (2003), ‘Audit Committee Characteristics and the Perceived Quality of Financial Reporting: An Empirical Analysis’, available at URL:http://www.ssrn.com/abstract=401240
Felton, R., and Watson, M., (2002), ‘Change across the board’, The McKinsey Quarterly, n.4: 40
Felton, R., (2004), ‘A new era in corporate governance’, The McKinsey Quarterly, n.2: 28-41
Gendron, Y., Bedard J. and Gosselin, M. (2004), ‘Getting Inside the Black Box: A field study of practices in “Effective” Audit Committees’, Auditing: A Journal of Practice and Theory, v.23:153-171
Goodwin, J. and Yeo, T.Y. (2001) ‘Two Factors Affecting Internal Audit Independence and Objectivity: Evidence from Singapore’, International Journal of Auditing, n.5:107-125
Grantham, R. (2004), ‘Corporate Governance codes in Australia and New Zealand: propriety and prosperity’, University of Queensland Law Journal, v. 23, n.1:218-225
Gray, S.J. (1988), ‘Towards a theory of cultural influence on the development of accounting systems internationally’, Abacus, 24, (1):1-13
Greenbury Report 1995, Study Group on Directors’ remuneration, available at URL: http://www.ecgi.org
Gwilliam, D. and Kilcommins, M. (1998) ‘The impact of Audit Firm Size and Audit Committee on Perceptions of Auditor Independence and Financial Statement Reliability in Ireland’, The Irish Accounting Review, v.5, n.1:23-56
Harris, M. (2006), ‘How good audit committees get the job done’, CA magazine, Jan/Feb: 16
Harrison, J. R. (1987), ‘The Strategic Use of Corporate Board Committees’, California Management Review, 30:109-125
Healey, M.J. and Rawlinson, M.B., (1993) ‘Interviewing business owners and managers: a review of methods and techniques’, Geoforum, v.24, n.3:339-355
Hellenic Capital Market Commission 1999, Code on Corporate Governance, Athens, Greece, Hellenic Capital Market Commission
Hellenic Capital Market Commission 2000, A code of conduct for companies listed in the Athens Stock Exchange and their affiliated persons (Rule 5/204/14-11-2000), Athens, Greece, Hellenic Capital Market Commission
Hellenic Government 2002, Law 3016 on Corporate Governance, board remuneration and other issues, Athens, Greece, Hellenic Government
Higgs, M. (1999) Senior Management Teams: What makes for Success?. Working Paper Series, no:9912. Henley Management College, UK
Higgs, D. (2003) Review of the role and effectiveness of non-executives directors, The Stationery Office, Department of Trade and Industry, available at: URL: http://www.dti.gov.uk
Hofstede, G., (1983), ‘The cultural relativity of organizational practices and theories’, Journal of International Business Studies, v.14, n.2, Fall: 75-89
Hofstede, G., (1991) Culture and Organization: Software of the Mind. London: McGraw-Hill
Hofstede, G., (2001) Culture’s Consequences (2nded.). Beverly Hills, USA:Sage
Hopwood, A.G., (1987), ‘The archaeology of accounting systems’, Accounting, Organizations and Society, v.12, n.3:207-234
Institute of Internal Auditors 2002a, Practice Advisory 1110-2: Chief Audit Executive (CAE) reporting lines, Florida, USA, The Institute of Internal Auditors
Institute of Internal Auditors 2002b, Recommendations for Improving Corporate Governance: Presented to the New York Stock Exchange, available at www.theiia.org
Institute of Internal Auditors Research Foundation 2003, Internal Audit and Organizational Governance, Florida, USA, The Institute of Internal Auditors
Institute of Internal Auditors 2004, International Standards for the Professional Practice of Internal Auditing, available at www.theiia.org
International Accounting Standards Committee (IASC) 1996, International Accounting Standards. London: Staples Printers Rochester
International Federation of Accountants 2003, Proposed revised code of ethics for professional accountants, available at URL: www.ifac.org
Jankowicz, A.D. (2005) Business Research Projects (4th ed), London: Thomson Learning
Jensen, M.C. (1993), ‘The modern industrial revolution, exit, and the failure of internal control systems’, Journal of Finance, 48: 831-880
Johnson K. and Scholes, (2001) Exploring Corporate Strategy, (2nd ed.) UK: Blackwell Publishing.
Jones, M., Carey, A. and Hunt, J. (2001) The Effective Audit Committee: A Challenging Role. London: ICAEW
Kalbers, L.P. and Fogarty, T.J. (1993), ‘Audit Committee Effectiveness: An Empirical Investigation of the contribution of power’, Auditing: A journal of practice and theory, vol.12 (no.1):24-48
Keasy, K. and Wright, M. (1997), Corporate Governance: Responsibilities, Risks and Remuneration. USA: Wiley & Sons
Keinath, A.K. and Walo, J.C. (2004), ‘Audit Committees Responsibilities: Focusing on Oversight, Open Communication, and Best Practices’, The CPA Journal, November
Kim B. (2003), ‘Recent Developments: Sarbanes-Oxley Act’, Harvard Journal on Legislation, vol.40:235-252
King, R.G and Levine, R. (1993), ‘Finance and Growth: Schumpeter might be right’, Quarterly Journal of Economics, v.108: 717-737
Koutoupis, A. (2004), ‘Corporate Governance and Internal Control Systems’, Economic Chronicles Journal, n.126.
Koutoupis, A. (2005), ‘Internal Audit and Corporate Governance in Greece’, Paper presented at the 3rd European Academic Conference on Internal Audit and Corporate Governance, Cass Business School, City University, London, UK, 6-8 April 2005
KPMG (2003a), ‘Audit Committee Quarterly-Fall 2003’, Audit Committee Institute, available at URL: http:// www.kpmg.com/aci
KPMG (2003b), ‘Building A Framework for Effective Audit Committees Oversight’, Audit Committee Roundtable Highlights, Audit Committee Institute, available at URL: http:// www.kpmg.com/aci
KPMG (2004), ‘Exploring Expectations of Audit Committee Effectiveness’, Audit Committee Roundtable Highlights, Audit Committee Institute, available at URL: http:// www.kpmg.com/aci
Krishman, J., (2005), ‘Audit Committee Quality and Internal Control: An Empirical Analysis’, The Accounting Review, v.80:649-675
Levitt, A., ‘The numbers Game’, speech presented at the New York University, Centre for Law and Business (Washington DC, USA, Sep.1998,www.sec.gov/news/speeches/spch220.txt
Livingston, P. (2003), ‘Financial Experts on Audit Committees’, Financial Executive, Jan-Feb: 6-7
McMullen, D.A., (1996), ‘Audit Committee Performance: An Investigation of the consequences Associated with Audit Committees’, Auditing: A Journal of Practice and Theory, vol.15:87-103
Menon, K. and Williams, J. (1994), ‘The use of audit committees for monitoring’, Journal of Accounting and Public Policy, v.13 (n.1):121-139
Miles, M.B. and Huberman, A.M. (1994) Qualitative Data Analysis (2nd ed). CA, USA: Sage publications
National Association of Corporate Directors (NACD) 2000a, Report of the NACD Blue Ribbon Commission on Audit Committees: A Practical Guide, Washington DC, USA, National Association of Corporate Directors
New York Stock Exchange 1940, Independent Audit and Audit Procedures, Accountant 122, No. 4, (April 6, 1940), p.383
Neuman, W.L., (2000) Social Research Methods (2nd ed.). London, UK: Allyn & Bacon
Noland T.G, Nichols, D and Flesher, D. (2004), “Audit Committee Effectiveness in the Banking Industry”, Management Accounting Quarterly, Vol.5 (n.3)
Organization for Economic Co-Operation and Development (OECD) 1999, OECD Principles of Corporate Governance, Paris, France, Organization for Economic Co-Operation and Development
Organization for Economic Co-Operation and Development (OECD) 2004, The OECD Principles of Corporate Governance, OECD Observer
Papas, A. (1993) European Financial reporting: GREECE, London: Routledge
Patton, M., 1990, Qualitative Evaluation and Research Methods, 2nd ed. USA: Sage Publications
Peters report (Commissie Peters) 1996, Recommendations on Corporate Governance in the Netherlands, Amsterdam Stock Exchange
Power, M. (1997), Audit Society: Rituals of Verification. Oxford:OUP
Powers W., Troubh, R. and Winocur, H. (2002), Report of investigation by the special investigation committee of the board of directors of Enron Corp. Feb. 1, 2002. Houston, TX, USA:Counsel: Wilmer, Cutler and Pickering
Preda report 1999, Codice di Autodisciplina (Report and code of conduct, Committee for the Corporate Governance of Listed Companies), Milano, Italy: Borsa Italiana, available at URL: http://www.borsaitalia.it
PriceWaterhouseCoppers Canada, (1998), Statement by D.W.Smith (new Chair of PriceWaterhouseCoopers Canada following the merger of PriceWaterhouse and Coopers & Lybrand). Press release (archived originally on the PriceWaterhouseCoppers Canada website but no longer available)
PriceWaterhouseCoppers, (2003), Audit Committees: Good Practices for meeting market Expectations, available at URL: www.pwc.com/corporatereporting
Prince, C. (2005) ‘What leading bankers think about sustainability’, Financial Times, 28 November 2005.
Public Oversight Board 1993a, In the public Interest: A special report by the Public Oversight Board of the SEC Practice Section. Stamford, CT, USA, American Institute of Certified Public Accountants
Public Oversight Board 1993b, Issues Confronting the Accounting Profession. Stamford, CT, USA American Institute of Certified Public Accountants
Quinn, R. and Cameron, K., (1983), ‘Organizational life cycles and shifting criteria of effectiveness: Some preliminary evidence’, Management Science, v.29, n.1: 33-51
Ragin, C. (1994) Constructing Social Research. Thousand Oaks, USA: Pine Forge Press
Report of the High-Level Group of Company Law (2002), Experts on a Modern Regulatory Framework for company Law in Europe, Jaap Winter report
Richardson, R.C. and Baril, C.P. (2003) ‘Can Your Audit Committee Withstand the Market's Scrutiny of Independence?’ Financial Executive, v.19 n.1: 35-38
Robson, C. (2002) Real World Research, (2nd ed.). Oxford, UK: Blackwell
Rosen R. (2003), ‘Risk Management and Corporate Governance: The case of Enron’, Connecticut Law Review, Vol. 35:1157-1184
Rubin, J. and Rubin, I.S. (1995) Qualitative Interviewing: The Art of Hearing Data. Thousand Oaks, USA: Sage publications
Sarbanes-Oxley Act (2002), Public Law 107-204. U.S. 107th Congress
Sarens G. and De Beelde I. (2006) Interaction between internal audit and the audit committee: An analysis of expectations and perceptions. University of Gent Working Paper no: 357. Department of Accounting and Corporate Finance, University of Gent, Belgium.
Saunders, M., Lewis, P. and Thornhill, A. (2006) Research Methods for Business Students (4th ed). London, UK: Prentice Hall
Scharff, M.M., (2005), ‘Understanding WorldCom’s Accounting Fraud: Did Groupthink Play a Role?’, Journal of Leadership & Organizational Studies, v.11, n.3:109-118
Securities and Exchange Commission 1980, Division of Corporate Finance, Staff report on Corporate Accountability, Washington, U.S. Government Printing Office
Securities and Exchange Commission 2003, Release n.33-8238, Washington, available at URL: http://www.sec.gov/rules/final/33-8238.htm
Shandor, J., (1989), ‘Audit Committees Take a Broader Role in Corporate policy’, Corporate Controller 2, Nov-Dec: 46-48
Silvermann, D., (2000) Doing Qualitative Research: A practical Handbook. London, UK: Sage
Smith Report 2003, Audit Committees Combined Code Guidance, Financial Reporting Council, available at URL:http://www.frc.org.uk/publications
Smith, C. and Stulz R. (1985), ‘The Determinants of firms’ hedging policies’, Journal of Financial and Quantitative Analysis, v. 20, is.4:391-405
Song, J. and Windram, B., (2000), ‘Benchmarking Audit Committee Effectiveness in the UK’, available at URL: http://ssrn.com/abstract=249865
Sosic, J. and Jung, D. (2002), ‘Work-Group Characteristics and Performance in Collectivistic and Individualistic Cultures’, The Journal of Social Psychology, v.142, n.1:5-23
Spangler, W.D., and Braiotta, L. Jr., (1990), ‘Leadership and Corporate Audit Committee Effectiveness’, Group and Organizational Studies, June: 134-157
Spanos, L., (2005), ‘Corporate Governance in Greece: developments and policy implications’, Corporate Governance, vol.5 (no.1):15-30
Spencer, A., (1983) On the edge of the organization: The role of the outside director. Chichester, USA: John Wiley
Spira, L.F. (1998), ‘An Evolutionary Perspective on Audit Committee Effectiveness’, Corporate Governance: An International Review, vol.6 (no.1):29-38
Spira, L.F. (2002) The Audit Committee: Performing Corporate Governance. Boston, USA: Kluwer
Spira, L.F. (2003), ‘Audit Committees: begging the question?’, Corporate Governance, v.11, n.3, July.
SRI International 1987, Investor Information Needs and the Annual Report, Financial Executive Research Foundation, NJ, USA, Financial Executive Institute
Steinberg, R.M. (2005), ‘How Audit Committees Best Carry Out Responsibilities’, available at http://www.complianceweek.com
Stulz, R., (1984), ‘Optimal Hedging Policies’, Journal of Financial and Quantitative Analysis, v.19, issue 2:127-140
Stulz, R., (1990), ‘Managerial Discretion and Optimal financing policies’, Journal of Financial Economics, v.26, issue 1:3-28
Ta Nea, Greek daily newspaper (25 February 2006)
Terrell, M. and Reed, S. (2003), ‘Audit Committees – A more visible and demanding role’, Corporate Governance: A Guide to Corporate Accountability, Fall 2003
The Institute of Chartered Accountants in England and Wales (ICAEW) 2003, Guidance for audit committees: Evaluating your auditors. London, UK: The Institute of Chartered Accountants in England and Wales
Thomopoulos, P. (2006), The Greek Economy and its Outlook, Speech, available at http://www.bankofgreece.gr/en/announcements
Thomson, L.L. (2004), Making the Team: A guide for managers” (2nd ed.). USA: Pearson Prentice Hall
Treadway Commission (NCFFR) 1987, Report of the National Commission on Fraudulent Financial Reporting, Washington, USA, National Commission on Fraudulent Financial Reporting
Tricker, R.I. (1978) The Independent Director-A study of the Non-Executive Director and of the Audit Committee. London, UK: Tolley Publishing Ltd.
Tricker, R.I. (1994) International Corporate Governance: Text, Readings and Cases. Singapore: Simon and Schuster
Tricker, R.I (2000) Corporate Governance (History of Management Thought). UK: Ashgate Publishing
Turley J. (2002), ‘The future of corporate reporting: From the Top’, Financial Executive, Dec.2002:54-56
Turley, S. and Zaman, M. (2004), ‘The Corporate Governance Effects of Audit Committees’, Journal of Management and Governance, v.8:305-332
Turnbull Report 1999, Internal control: Guidance for Directors of Listed Companies Incorporated in the United Kingdom. London, UK: Institute of Chartered Accountants in England and Wales
U.S. General Accounting Office (2003), GAO Forum on Governance and Accountability, Challenges to restore public confidence in U.S. corporate governance and accountability systems. USA, U.S. General Accounting Office available at URL: www.gao.gov
Vanasco, R.R. (1994) ‘The Audit Committees: An International Perspective’, Managerial Auditing Journal, v.9, n.8: 18-40
Van Hoek, A. (1988), Audit Committees and the Internal auditor, Proceedings of the 2nd European Conference of the Institute of Internal Auditors, Brussels
Vienot I Report 1995, The board of directors of listed companies in France, Conseil National du Patronat Français (CNPF) & Association Francaise des Entreprises Privees (AFEP), available at URL: http://www.ecgi.org
Watts, R. & Zimmerman, J. (1983), ‘Agency problems, Auditing, and the Theory of the Firm: Some Evidence’, Journal of Law and Economics, v.26:613-633
Wild, J. (1994) ‘Managerial Accountability to Shareholders: Audit Committees and the Explanatory power for Returns’, British Accounting Review, 26:353-374
Wild, J. (1996) ‘The Audit Committee and Earnings Quality’, Journal of Accounting, Auditing and Finance, 11(2):247-276
Williams, H.M. (1977), ‘Audit Committees-The Public Sector’s View’, Journal of Accountancy, v. 144, n.3:71-74
Williamson, O.E. (1984), ‘Corporate Governance’, Yale Law Journal, 93: 1197-1230
Wolnizer, P.W., (1995), ‘Are audit Committees red herrings?’, Abacus, 31 (1):45-66
World Bank 2000, Corporate Governance: A Framework for Implementation, Paris, France: World Bank
Yin, R.K. (2003) Case Study Research: Design and Method (3rd ed.). London, UK: Sage
Zong, L., (2004), ‘The road to stronger corporate governance’, The Corporate Board, March/ April: 16-21
Σε περίπτωση που επιθυμεί κανείς να λάβει το πλήρες Paper με τους πίνακες μπορεί να επικοινωνήσει με τον συγγραφέα στο akoutoupis@ba.aegean.gr.
Το Paper αυτό παρουσιάσθηκε στο 8ο Ακαδημαϊκό Συνέδριο για την Εταιρική Διακυβέρνηση και τον Εσωτερικό Έλεγχο που διοργανώθηκε από το Πανεπιστήμιο Αιγαίου (τμήμα Διοίκησης Επιχειρήσεων (Χίος)) σε συνεργασία με αρκετά ακόμη Ευρωπαϊκά Πανεπιστήμια τον Απρίλιο του 2010.
Adjunct Lecturer,
University of the Aegean
Department of Business Administration
April 2010
1. Introduction
Recent corporate scandals, such as Enron and WorldCom, have focused the minds of governments, regulators, companies, investors and the general public on weaknesses in corporate governance systems and the need to address this issue (OECD, 2004:1)
Corporate governance issues have always been integral to business practices, beginning with the “agency problem” between corporations, owners, managers and the directors who represent the owners. However, Tricker (2000:xiii), calls the 21st century as the century of governance as concerns the shift from mechanisms of management to legitimacy and accountability in an era when corporate power has become global in its scope.
For over 20 years, a series of committees have been created of inquiry into the financial aspects of corporate governance in most developed countries. As a result, various reports with codes of best practices and recommendations have been emerged or implemented in an attempt to improve corporate governance mainly in the Anglo-Saxon world (Treadway Commission, 1987 and POB, 1993 in the US; Cadbury Report, 1992; Greenbury report, 1995; the Combined Code, 1999; Turnbull, 1999, Higgs Report, 2003 and the new Combined Code, 2003 in the UK).
In the past, the audit committee’s emphasis was on accurate financial reporting. Over the years, the audit committee’s function has expanded into oversight of internal controls and oversees the processes that monitor compliance with laws, regulations and the corporate code of conduct (Colley et al, 2005). However, and despite the prominent and extensive examples of new and tighter rules and guidance for audit committees and the overall audit process, corporate scandals have continued to shock the business community (Enron, Parmalat, Ahold, etc) and have led to serious concerns over the effectiveness of board of directors and audit committees and finally to enact reforms to improve the effectiveness of audit committees (BRC 1999; Sarbanes-Oxley Act, 2002). For example in the Enron case, the Powers report (2002) concluded that Enron’s board
…failed to monitor...and safeguard Enron’s shareholders.
Associated with the greater use of audit committees as a governance mechanism and given that their appointment is currently mandatory for Greek banks (Bank of Greece Governor’s Act: 2577), the author will try to shed light on the drivers that may lead to an effective audit committee (hereafter AC).
2. Audit Committees Effectiveness
“Codes of best practices”, stock exchange requirements, legislation and other guidelines were designed to meet the goal of “making audit committees more effective” (i.e. BRC, 1999:2). However, whether ACs’ are actually discharging their important responsibilities remains insufficiently understood. A serious concern exists over whether AC members are focusing more on procedural matters to protect themselves from liability than on improving their competence and effectiveness as a committee (U.S. General Accounting Office, 2003).
There is a definitional problem which pervades the AC effectiveness literature (Spira, 2002). Most of the best practices and regulations (BRC, 1999, SOX, 2002), as well as most of the researchers (Beasley 1996, DeZoort 1997), identified indicators such as:
Financial literacy,
Director independence and
Frequency of meetings as contributing to AC effectiveness.
Although these studies focus on important characteristics affecting AC performance, the purpose of AC activity and the criteria used to evaluate effectiveness are not clearly defined (Spira, 1998).
According to New Oxford Dictionary:
Effective means successful in producing a desired or intended result
Since the main purpose of the AC is to oversee the accounting, auditing and financial reporting process, effective AC may be defined as the success of AC’s oversight efforts. De Zoort et al (2002) offer the following definition.
However, effective oversight goes beyond mere compliance with the rules; it requires careful consideration of an AC framework that facilitates the coordination of activities and information needed to support the committee’s understanding and monitoring of a company’s financial reporting process (Terrell & Reed, 2003).
Cameron (1986) mentioned that the primary task facing any investigator of effectiveness lies in determining what are the appropriate indicators and measures and that effectiveness is a multidimensional construct. Additionally, many researchers have highlighted the potential validity of employing “soft” and “hard” measures in evaluating team performance (Higgs, 1999). In an earlier case study (Quinn & Cameron, 1983) concluded that major criteria of effectiveness change in predictable ways as organizations develop through their life-cycle. Consistent with Quinn & Cameron (1983), Spira (1998) suggests that audit committee effectiveness is clearly associated with evolution through time.
According to PWC (2003), systems, structure and processes are important indicators to audit committee’s success. Moreover:
2.1.1 Organizational systems, structure and operation
a. AC charter: Adoption and annually reassessing of a written charter, approved by the board, which describes the scope of activities, duties and responsibilities of the AC
b. Independent and qualified members: AC members must be independent, in fact and in appearance, without any “grey” areas compromising independency such as interlocking directorships, related-party transactions, lawyers receiving fee income and kinship relations. Additionally, membership should consist of both financial and non-financial members with a good mix of business judgment, banking experience and knowledge of social and cultural conditions of the country
c. Financial reporting expert with experience in GAAP and audits
d. Meetings and minutes, correspond with the major phases of the financial reporting, external audit and internal audit cycles with a detailed written agenda and adequate supporting papers highlighting matters for decision. When needed, separate meetings should be arranged with senior management, internal and external auditors.
e. Induction and orientation of new members regarding industry matters, entity’s business matters, as well as internal auditing and external auditing matters.
2.1.2 Financial reporting, risk assessment & internal control
f. Review risk assessment process and risk mitigation action plan with details of the bank’s potential fraud, compliance and operating risks.
g. Review and discuss the implementation of key accounting policies and financial reporting and evaluate the overall effectiveness of the internal control and financial, operational and compliance risk management framework.
h. Reinforce a strong “control culture”
2.1.3 Internal and external audit
i. Review and evaluate the objectives, plans and policy of the internal audit department
j. Review the organizational structure, the quality and the effectiveness of the internal audit function
k. Review the operational activities of the auditing staff in the context of achieving their goals and objectives
l. Consider the independence of the external auditors
m. Review the audit plan and the scope of work
n. Review the qualifications, performance and compensation of the external auditors and make recommendations for their appointment
The following figure concludes that internal and external auditors’ effectiveness is associated with AC effectiveness.
In addition, ACs must ensure that they continuously improve their oversight role. Moreover, the AC should reflect and assess its overall operating performance and that of each AC member (PWC, 2003). As an example ACs might benchmark their performance against their formal written chapter (Braiotta, 2002). Continuous education of directors is also an important factor. Tailored workshops with modules led by management, internal audit, external auditors and in-house or external counsel are deemed essential in the continuous education process (PWC, 2003).
Corporate accountability has always been very important and stakeholders rely on the BoD to ensure it. Investors’ activism and stakeholder demands have resulted in numerous proposals for corporate governance reforms in the international environment. Board monitoring and the need for more accountability have been central in most of these reforms.
ACs’ have a critical role to play within the framework of corporate accountability. Initially, it was the Anglo-Saxon environment that supported their establishment followed by a growing global acceptance associated with directors’ conformance and performance roles.
There is no doubt that the role of the AC in banks is of special importance and of particular complexity. Vast sums of money and other financial assets and information are in constant motion, therefore internal controls are unique and singularly difficult. In addition, the technology used in the business is becoming increasingly sophisticated and complex. Given the complexity of those issues, the effectiveness of ACs in banks is of far more greater importance.
In the Greek business environment, ACs are mainly responsible for the monitoring the financial reporting process. The socio-cultural values and forces (high uncertainty avoidance and collectivism) in Greece explain, to a large extent, the legal compliance aspect of corporate governance rather than initiatives derived from business and may affect the performance and decision-making processes (group think). The question of whether AC framework should be left to be determined by free market forces or the regulator framework is a difficult one.
Risk management in Greek banks demonstrates that no systematic approach concerning identification, evaluation and management of risk is followed, while on the other hand seems that the majority of companies are able to identify the main risks that characterize them, however without following specific procedures as a means to secure accuracy and completeness of the identified risks.
3. Research Methodology
The author has decided to choose the “interpretivism” research philosophy in order to enter the social world of ACs and understand their world from their point of view (Saunders et al, 2006). Qualitative research is one of the two major approaches to research methodology in social science. Qualitative research involves investigating participants' opinions, behaviours and experiences from the informants' points of view. These criteria play an important role for the research topic since people involved in ACs will be the centre of attention when gathering data.
The focus of this work will be on exploratory and descriptive research, mapping the field and providing a structured approach to the issue. Multiple cases (Yin, 2003) research strategy has been chosen by the author mainly because case studies:
Have the potential to provide better understanding of accounting practice (Hopwood, 1987)
May be used to gain insight of the role and functioning of ACs in organizations and to compare the claimed potential of ACs with its practical achievements and consequences (Power, 1997)
Generalize the findings and reduce the impact of any corporate culture bias (Yin, 2003).
Therefore, the planned study was based on five Greek banks mainly due to the fact that:
Those banks represent the five highest market capitalization Greek banks in the ASE (closing date 12Sep2007)
access to audit committee members and others involved in the AC work could be assured
A non-probability purposive sample (Saunders et al, 2006) of thirteen (13) individuals who have current experience with ACs has been chosen by the author since purposive samples are often used in case study research strategies (Newman, 2000). According to Patton (2002), the selected interviewees are critical since
If it happens there, it will happen everywhere
Two groups of interviewees were chosen in order to add value to the project.
Internal auditors and ACs members
External auditors from Big Four public accounting firms who are directly involved in auditing the aforementioned banks.
Interviewing all categories of people involved in ACs offered a rounded picture and some opportunity of checking data validity (Spira, 1998) and can be regarded as data-triangulation (Denzin, 1989).
Prior to the interviews, a list of interview themes about activities and effectiveness of ACs has been sent in advance (10 days) to those that would be interviewed. Those themes were based on the theoretical and conceptual framework and provided a focal point for the interview without restricting dialogue and have been focused around:
Organization and authority of the audit committee
Members qualification, background
Information nature and meetings process
Oversight of Internal control and risk management systems
Relationship with external, internal auditors and management
Assessing AC performance
Providing interviewees with this information before the interview promoted validity and reliability by enabling them to consider the information being requested and allowing them the opportunity to assemble supporting organization documents from their files (Saunders et al, 2006:320).
Prior to the interviews, and in order to support interview data and enhance reliability, the author collected the following documentary secondary data.
Table 3: Overview of the data collected prior to the interviews
BANK 1 BANK 2 BANK 3 BANK 4 BANK 5
Documents AC Charter - AC Charter - -
Annual report Annual report Annual report Annual report Annual report
All face-to-face, semi-structured and one-to-one interviews were carried out between October and November 2007 at the offices of the interviewees. Initially, it was the author’s hope that an agreement to observe an AC meeting could be negotiated. However, Chairmen of the board were reluctant to allow this for confidentiality reasons.
Three (3) interviews were carried out with AC members (one of them was an AC chair), six (6) interviews with internal auditors (two of them were CAEs) and four (4) interviews with external auditors (one partner and three managers).
Figure 7: Interview participants’ roles in the banks
All interviews were conducted in Greek by the author customized the interview instrument for each category of interviewees. Both open and closed questions have been used followed by probing questions in order to explore responses that were of significance to the topic. However, and although there was a full set of questions in the instrument, the author did not ask all the questions and used the instrument in order to guide the interviews.
The interviews with internal and external auditors were tape-recorded. The interviews with the AC members were not tape-recorded since it was felt that, if they were, they would be less likely to discuss sensitive issues. All interviews lasted from 60 to 90 minutes.
The following table presents the interviewee’s role in each bank.
Table 4: Overview of the interviewee’s role in each bank
BANK 1 BANK 2 BANK 3 BANK 4 BANK 5
Interviewees ACC IA ACM CAE ACM
EA EA CAE EA IA
IA - IA - EA
The author emphasized that complete anonymity would be provided to all and to their perspective organization and no other organization member would examine the interview transcript.
By the end of the interview, respondents indicated that they could not think any additional items that might be important in the research.
The first step was to transcribe the interviews word by word and send them to the interviewees for approval. Then all interview transcripts were analyzed based on the analytical protocol recommended by Miles & Huberman (1994) and significant words or phrases were highlighted. Then, the author coded all interview transcripts according to the topics extracted from the interviewees’ answers as well as the conceptual framework presented in 5.1. This process enabled the author to easily drawn upon all things said on each specific topic by all the interviewees.
The four topics of AC effectiveness derived from the interviews are as follows:
1. AC Policy framework
2. AC members profile
3. Informational and Operational practices and procedures
4. Accountability process
The following sections present the aggregation of the answers of the thirteen interviews conducted on the topic of AC effectiveness in the Greek banking institutions as well as the analysis of the documents mentioned in Table 4. The results are presented by topic followed by a short discussion of the most important aspects.
4. Research Findings
4.1 AC Policy framework
The analysis of the documents collected by the author indicated that in the majority of the cases (80%) there is a written AC charter approved by the BoD. However, interviews revealed that only two of the sample banks (Bank 1 & 3) are annually re-assessing their AC charter and only one bank informs stakeholders about its AC Chapter through its internet site (Bank 1). Table 5 below expounds the data from the analysis.
Table 5: AC Charter in Greek banks
The set of questions related to AC Charter was to shed light in the content and context of the charter. A key focus here is to assess whether there is clear term of reference which can highlight the responsibilities and authority of the AC.
The audit committee members-participants were of the opinion that they have a clear reference guide to their responsibilities based on the new legislation (ΒοGA/2577) although argued that the existence of a written charter is an additional constituent of effectiveness. Although AC members felt that they have clear terms of reference through their charter, with the exception of Bank 5 where there is no AC charter yet, the interviews with internal and external auditors’ evidence that AC members are unaware of their objectives and scope of work as a committee. Internal and external auditors felt that their scope of work is restricted overseeing external audit function and review of banks financial statements.
4.2 AC members’ profile
In order to uncover the “quality” of AC members, the interviewees were asked about the selection, orientation and training processes as well as financial expertise and banking sector knowledge of the AC members.
Members’ appointment & independence
The ΒοGA/2577 declares that ACs’ should be composed of non-executive directors with at least one independent member.
The analysis of the secondary data (banks’ annual reports) revealed that all ACs in the sample comply with the definition of independent directors as specified in Law 3016 (Corporate Governance Law). However, only Bank 1 (20%) complies with BRC (1999) which specifies that AC’s should comprise only with outside and independent directors. The main reason seems to be that Bank 1 is listed in NYSE therefore should comply with SOX (2002).
Additionally, and contrary to what is being mentioned to the majority of the AC charters regarding nomination process, interviews revealed that the Chairman of the BoD is proposing a new member to the General Assembly and the shareholders are handling the process in a “rubber-stamp” approach.
The majority of the external and internal auditor partners (70%) agreed that AC members’ independence seems to be the major handicap on the role of ACs and it is based mainly on the nomination process of new AC members
Table 6: AC Members independence in Greek Banks
Induction, orientation and training
Surprisingly, none of the banks (100%) had a formal induction process, orientation and training processes for new AC members although AC interview partners recognize that AC member’s personality is the most important driver for orientation in a new appointment.
However, with the lack of a formal induction process most directors come to ACs assuming what the job is, since they sometime have experience in other boards. Most of the EA and IA interview partners argued that the selection and orientation processes are two of the major handicaps in AC effectiveness.
Qualifications & background
Regarding qualifications of an effective AC member, the following statement sums up well what all interviewees believe to some extent that members’ competence, diligence and independence are key drivers of effectiveness.
Frequently during the interviews, the AC interview partners argued that their extensive financial and auditing background is contributing to AC effectiveness.
The external auditors were argued that the new Governor’s Act (2577) was the driver for the change. One EA (Bank 5) commented as follows:
Traditionally, one of the major weaknesses of the ACs of Greek banks was that its members were not qualified in auditing and or accounting and therefore there were not qualified to carry out their role effectively. However, with the new legislation, banks demonstrated an immediate response to the new requirements.
Table 7: Overview of interview AC members’ background
BANK 1 BANK 3 BANK 5
Interviewee ACC ACM ACM
Background Degree in Finance; MBA;
Prior Senior Partner in one of the Big 8 accounting firms;
ACCA member Degree in Economics;
Twenty five years of experience as a Lead auditor; CIA;
Currently business consultant Degree in Law; Strong experience as an auditor;
Currently CEO of an investment company
Associated with the members’ background it appears that competencies, skills and expertise may generate feelings of self confidence and thereby possibly affecting the performance of members during meetings.
4.3 Informational and Operational practices and procedures
The objective is to shed light on the information protocols between ACs’ and management, internal and external auditors as well as the practices during AC meetings.
Agenda
An important factor affecting the effectiveness of ACs in Greek banks according to the interviews is the quality of information provided to them. ACs rely on receiving “the right information at the right time” (ACM, Bank 5) from CFO as well as the external auditors.
The benefits of highly scheduled and structured meetings with an agenda sent in advance to members are clearly defined by IAs. The interview evidence suggested that in all banks, the agenda is sent to the members along with previous minutes well in advance to the meeting. However, in Bank 1 the CEO (also Chair the BoD) agrees the agenda with the ACC, while in banks 3 and 4 the agenda is prepared using a schedule of routine activities (in accordance with statutory reports and accounts) and in banks 2 and 5 the agenda is prepared mainly by the IA in accordance with prior agendas and minutes.
The following table presents some documentary and logistical features of AC meetings in the Greek banks.
Table 8: Documentary and logistical features of meetings as reported by interviewees
Issue BANK 1 BANK 2 BANK 3 BANK 4 BANK 5
Preparation of Agenda Prepared by the CEO and agreed with Chair Prepared by IA Prepared by Chair Prepared by Chair Prepared jointly by IA and EA
Information sent to members prior to the meeting YES; minutes of prior meeting; reports from IA & EA; Agenda YES; reports from IA & EA; prior minutes of meeting; Agenda YES; prior minutes of meeting; Agenda; YES; Agenda; Reports form IA & EA; prior minutes of meeting; YES; Agenda; prior minutes of meeting;
Meetings
Meetings have been a source of some surprise since almost each bank had a different approach. The interviews identified the irregular pattern of AC meetings. All ACs in the sample meet the legislative requirement that should meet at least four times per year. However, there is a range from 4 meetings/year, up to 16 meetings /year.
Table 9: AC Meetings /year
Meetings participants
With the exception of Bank 1“…Our agenda is driving the attendance at the meetings (ACC)” and in regards to the attendance in meetings, it was clear from the interviewees that AC meetings are almost “isolated” from “external” partners such as senior management and external auditors. Sometimes the CFO is attending AC meetings and most of the audit committee members interviewees said that the presence of the CFO undermine the AC’s “control” of the meetings.
All the external auditors’ interviewees indicated that attendance in every AC meeting will assist is ensuring an effective working relationship between AC and external audit. The EA (Bank 4) commented on that in the following way:
I see the AC as a bridge between management and EAs’ therefore we strongly recommend to the AC to regularly attend some of the meetings. Although AC members have the experience, we can assist them to ask management the relevant questions. However, we rarely attend AC meetings and when this happens is usually before the disclosure of the proxy statement.
However, informal meetings with external auditors are very common. The ACM (Bank 5) mentioned:
I know well the partner of our auditors since we have known each other for more that 20 years. Every couple of months we go out together, have lunch and informally discuss several issues regarding the effectiveness of our controls, the risks we face, etc
In the same path, with the exception of Banks 1 and 3, the IAs had little possibility in attending AC meetings mainly since the internal audit profession is relatively new in Greece and the potential value derived from its operation is not clearly evident. As an IA (Bank 2) clearly stated:
We have to strengthen our perceived role regarding ACs. We need to devote more time in promoting our work with more focused reports in order to be able to attend meetings
Additionally, all banks do not disclose in their proxy statement the number of meetings annually as well as the names of ACMs’ who attended the meetings.
Oversight of internal control system and internal audit
According to the existing AC charters, all ACs (100%) in the sample banks, have a duty to review and monitor the effectiveness of internal control system and especially those policies, procedures and accounting system related to financial reporting. However, interviews revealed that only the 40% of the banks have formal processes in reviewing risk management and internal control systems.
Table 10: Review of the risk management & control systems
According to the AC Charter 100%
Existence of formal processes for reviewing 40%
Here, the interviewees rely on particular documents that ensure the existence of a risk management process throughout the banks. In one case there is a bi-monthly report and in the other case there is a certification by the business units. However, and despite the existence of code of conducts, most of the IAs claimed to be concerned with the culture and the corporate behaviour. The “tone at the top” was the issue of concern.
In all cases (100%) there is an Internal Audit Charter containing a written scope and objectives within. However, only in Banks 1 and 3 (40%), the IA Charter is approved by the AC. According to many IAs’ this charter usually contain the department’s chart, purpose and responsibilities.
Table 11: IA Charter
Existence of an IA Charter 100%
IA Charter approved by the AC 40%
The analysis of the interviews indicates that internal audit departments typically report to the AC and they have an annual internal audit plan but in most of the cases the departments didn’t have the relevant human resources to achieve the plan mainly due to competency and objectivity reasons.
External auditors’ interviewees also believe that IAs do not posses the necessary skills and competencies in order to add value to the organization they serve.
Another important finding was related to the internal audit reports. The analysis indicated that the majority of reports are not user friendly, since they contain much information which is not useful for the audit scope and purpose. There is also lack in the ranking of the audit findings (e.g. significant, major, minor, etc.) as well as no link with the potential risks. However, all ACMs interviewed, mentioned that they pay careful attention to the extent to which management adopt measures to solve any issues raised during the internal audit reports.
Another major issue derived from the analysis is that almost all ACs do not involve in appraising the quality of IA staff. With the exception of appointment and replacement of the CAE, ACs have not developed and implemented performance measures for the accomplishment of IA tasks. Only in banks 1 and 3 there are periodic quality reviews of IA departments taking place by independent third parties that certify the adequacy of the organizational system of internal controls and also the appropriateness of internal audit services.
Oversight of external audit
The focus here is to ascertain how the AC maintains the integrity of the audit process and the independence of the external auditor. According to the existing AC charters, all ACs in the sample banks, have a duty to monitor the selection and evaluate the performance of external auditors.
However, interview evidences that the interaction between external auditors and the AC is limited to monitor the financial-reporting process. Moreover, in all cases (100%), appointment and remuneration of external auditors seems to be a matter of senior management and especially the CFO and the AC sometimes is only informed about the audit firm. Additionally, any approvals for a change in auditors would come from the executive management and especially the CFO.
In addition, in all cases (100%), ACs require only an explanation from the CFO if there is an increase in audit fees and most of the times, ACMs are not aware for any non-audit fees. As an example in Bank 2, the audit firm is providing a numerous of non-audit services such as tax consulting, project management in various projects e.t.c. The Greek Corporate Governance related regulation (L.3016) does not totally prohibit the conduct of non-audit services by the same audit firm.
Most audit committee members and external auditors indicated that they meet with each other approximately two to three times per year although there are some cases such as Bank 1 where there are informal meetings between ACC and the partner of external audit firm. The most common issues discussed during the meetings are related to the audit plan, containing a summary of the audit scope, as well as audit findings. Interviews indicated that:
There are no formal discussions between external auditors and the AC in regards to any disagreements between external audit and management and
The relationship between external auditors and the AC is not interactive and seems to be a one-way process since auditors are presenting significant audit findings.
Interviews revealed that, with the exception of Bank 1, there is no formal process for the evaluation of the audit firm. The ACC (Bank 1) illustrated this in the following way:
Table 12: Evaluation of the external audit process
According to the AC charter 100%
Existence of a formal evaluation process 20%
4.4 Accountability process
The objective of this part is to shed light on how the BoD assesses ACs’ operating performance. A key focus here is to assess whether there is an annual action plan and a clear quality assurance plan in order to ensure the effectiveness and efficiency of the aforementioned oversight input and processes which, in turn, lead to a high level of assurance of the BoD’s corporate accountability (Braiotta, 2004).
In Greek banks’, AC evaluation is required by the Governor’s Act 2577. Evaluations should occur by external auditors every three years and ACs’ are evaluated as a part of the overall bank’s control environment.
However, the interviews evidence that in all (100%) cases ACs’ receive the results from the evaluation and do not have a system in place to implement those recommendations. In parallel, ACs’ do not have a system in place to self-assess their performance. Moreover, ACs’ do not have an annual action plan and they do not benchmark a performance review against their AC charter.
5. Conclusions and Recommendations
Interviews exposed that ACs’ are not evaluating their performance and the lack of this evaluation is a significant barrier for improving internal governance and external accountability. ACs and individual members’ performance evaluations represent a valuable opportunity to assess both strengths and weaknesses and evaluate AC’s role and contribution on corporate performance and conformance.
Therefore we can conclude that there is a gap between the theoretical and conceptual framework and field research. In order to ensure accountability, ACs should evaluate their performance on a regular basis (annually) through self-assessments and with the assistance of an external facilitator such as the external auditor. The results of the assessment should be communicated to the BoD and the stakeholders and should be accompanied with an action plan to respond in the identified areas for improvement.
Consequently, the following key driver may be suggested:
Key driver Attributes of effectiveness
Measuring and Improving Performance Develop an assessment framework (i.e a Balanced Scorecard) to improve the accountability process
Interview evidence and discussion presented above, highlighted a number of concerns as to the operational efficiency of the ACs in the Greek banks, although we may conclude that the policies and procedures concerning the AC framework are partially adequate and present a direction for compliance with best practices. However, it is their implementation that can be considered neither effective nor efficient. As such, an “expectation gap” exists between what ACs are expected to do and what they actually do.
This “gap” is possibly associated with the Greek cultural and social framework (uncertainty avoidance, collectivism, passive behaviour from investors, e.t.c.) as well as what Spira (1998) defines as an “infant” stage of evolution.
It is generally acknowledged that it is difficult to address cultural and social issues through a procedural framework. Additionally, as noted in the literature, in high uncertainty avoidance societies, there is a clear tendency for regulatory compliance and organizational legitimacy. Hence, and perhaps reflecting the paramount role of the state in high uncertainty avoidance societies, it is suggested that any mechanisms for improving both the adequacy of AC policies and procedures and their effective implementation, should rely on a relevant enhancement of the AC regulation.
In particular, it is further suggested that the existing regulation may be enhanced, providing sufficient or detailed guidance on the following:
i. The content of the AC charter
ii. The selection/recruitment and induction processes of AC members
iii. The informational and operational routines (i.e. an implementing framework to assess the adequacy of effectiveness and efficiency of the System of Internal Control, combined with auditing and assurance standards such as COSO and GAAS, respectively)
iv. The accountability criteria and processes
Given the fact that ACs’ in the Greek banks are in their “infant” stage and would encounter difficulties with a detailed guidance, the provision of “comply or explain” should be allowed, at least at the early stages of development.
In order for such a mechanism to lead quickly to what Spira (1998) describes as “mature stage” of AC development, it is necessary to be coupled by appropriate disclosures by the financial institutions. The latter on one hand would enhance compliance with the said regulation through market discipline, and on the other hand it would enhance investor activism.
Reference List
American Assembly 1978, Corporate Governance in America, Pamphlet 54. New York, USA: Columbia University
American Bar Association 1980, Committee on Corporate Laws: The Overview Committee of the Board of Directors, Business Lawyer, 35: 1335-1364
American Institute of Certified Public Accountants (AICPA) 1978, Audit Committees: Answers to Typical Questions about their Organization and Operations. New York, USA, American Institute of Certified Public Accountants
American Institute of Certified Public Accountants (AICPA) 1993, Meeting the Financial Reporting Needs of the Future: A Public Commitment from the Public Accounting Profession, New York, USA, American Institute of Certified Public Accountants
Bank of Greece 2002, Governor’s Act GA/2494/5.6.2002, Athens, Greece, Bank of Greece
Bank of Greece 2006, Governor’s Act GA/2577/9.3.2006, Athens, Greece, Bank of Greece
Barrett, M.J. and Tiessen, P. (1989) ‘Organizational Support for Internal Auditing’, Internal Auditing, v.5, n.2, Fall: 52-53
Basel Committee on Banking Supervision 2006, Enhancing corporate governance for banking organizations, Basel, Switzerland, Bank for International Settlements
Bavly, D. (1999) Corporate Governance and Accountability: What role for the regulator, Director, and Auditor?. Westport, CT, USA: Greenwood Press
Bean, J.W. (1999), ‘The Audit Committee’s Roadmap’, Journal of Accountancy, Jan.1999:47-54
Beasley, M.S. (1996), ‘An Empirical Analysis of the Relation between the Board of Director Composition and Financial Statement Fraud’, The Accounting Review, v.71:443-465
Bishop, W.G., Hermanson, D.R., Lapides, P.D. and Rittenberg, L.E. (2000), ‘The year of the audit committee’, Internal Auditor, 57:46-51
Blanchard, D. and Dionne, G. (2003) Risk Management and Corporate Governance. HEC Montreal Working Paper 03-04. HEC Montreal, Canada (Presented at the workshop “The Crisis of Corporate Governance: What’s next?” organized by M.Renaud, president of the Social Sciences and Humanities Research Council of Canada, as part of the Montreal Conference, held on 7 May 2003)
Blue Ribbon Committee (BRC) 1999, Report and Recommendations of the Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees, New York, New York Stock Exchange and National Association of Securities Dealers
Boyd, C. (2004), ‘The structural origins of conflicts of interests in the accounting profession’, Business Ethics Quarterly, v.14, is.3:377-398
Braiotta, L. Jr. (2002), ‘Corporate Audit Committees: An Approach to Continuous Improvement’, CPA Journal, v.72, n.7.
Braiotta, L. Jr. (2004) The Audit Committee handbook, (4th ed.). USA: Wiley
Brilliant D. (1995), ‘Tone at the top’, The Banker, Nov.1995, vol.145
Buckley, A. and Van Der Nat, M., (2003) ‘Derivatives and the non-executive director’, European Management Journal, v.21, issue 3:389-397
Buehler K. and Pritsch G. (2003), ‘Running with risk’, The McKinsey Quarterly, n.4
Business Roundtable 1990, Corporate Governance and American Competitiveness, New York, USA, The Business Roundtable
Business Roundtable 2005, Principles of Corporate Governance, New York, USA, The Business Roundtable
Cadbury Report 1992, Report of the Committee on the Financial Aspects of Corporate Governance, available at URL: http://www.ecgi.org/codes.
Cameron, K., (1986), ‘Effectiveness as paradox: Consensus and conflict in conceptions of organizational effectiveness’, Management Science, v.32, n.5: 539-553
Carcello, J. V. and Neal, T.L. (2000), ‘Audit Committee composition and Auditor reporting’, The Accounting Review, (October):453-467
Carcello, J.V., Hermanson, D.R., Neal, T.L., and Riley, R.Jr., (2002) ‘Board characteristics and audit fees’, Contemporary Accounting Research, (Fall):365-384
Carcello, J. V. and Neal, T.L. (2003), ‘Audit Committee characteristics and auditor dismissals following new going concern reports’, The Accounting Review, (January):453-467
Cohen, J., Pant, L., Sharp, D., (1993), ‘Culture-Based Ethical Conflicts Confronting Multinational Accounting Firms’, Accounting Horizons, v.7, n.3:1-13
Cohen, J., Krishnamoorthy, G. and Wright, A. (2002), ‘Corporate governance and the audit process’, Contemporary Accounting Research, (winter):573-594
Colley J. Jr., Doyle, J., Logan, G. and Stettinius, W. (2005) What is Corporate Governance. USA: McGrew-Hill
Collier, P.A. 1992, Audit Committees in Large U.K. Companies, London, UK, Research Board of the Institute of Chartered Accountants in England and Wales (ICAEW)
Collier, P.A and Zaman, M. (2005) ‘Convergence in European Governance Codes: The Audit Committee Concept’, Corporate Governance: An International Review, v.13, n.6: 753-768
Combined Code (The) 2000, Principles of Good Governance and Code of Best Practice, London, UK available at URL: http://www.ecgi.org/codes
Committee of Sponsoring Organizations of the Treadway Commission (COSO) 1992, Internal Control-Integrated Framework, New York, USA, Committee of Sponsoring Organizations of the Treadway Commission, available at URL:http://www.coso.org/publications
Dallas, G. (2004) Governance and Risk. USA: McGrew-Hill
Darden, C., and Pech, R., (2006), ‘The increasing cost of corporate governance: decision speed-bumps for managers’, Corporate Governance, v.6, n.1:84-95
Dechow, P. W., Sloan, R.G. and Sweeny, A.P., (1996), ‘Causes and Consequences of earnings manipulation: an analysis of firms subject to enforcement actions by the SEC’, Contemporary Accounting Research, 13(10):1-13
DeFond, M.L. and Jiambalvo, J. (1991), ‘Incidence and Circumstances of Accounting Errors’, Accounting Review, v.66, n.3:643-655
De Jong, E. and Semenov, R. (2002), ‘Cross-Country Differences in Stock Market Development: A Cultural View’ available at URL: http://www.ssrn.com
DeMarco, P., and Duffie, D., (1991), ‘Corporate financial hedging with proprietary information’, Journal of Economic theory, v.53, is. 2:261-286
Demb, A. & Neubauer, F.F. (1992) The corporate board: Confronting the paradoxes. New York, USA: Oxford University Press
Denzin, N. (1989) The Research Act: A Theoretical Introduction to Sociological Methods (3rd ed). NJ, USA: Prentice Hall
DeZoort, F.T. (1997), ‘An Investigation of audit committees’ oversight responsibilities’, Abacus (September):208-227
DeZoort, F.T., Hermanson, D.R, Archambeault, D.S., and Reed, S.A. (2002) ‘Audit Committee Effectiveness: A Synthesis of the Empirical Audit Committee Literature’, Journal of Accounting Literature, v.21:38-75
Dickson, M. (2003) ‘Higg’s bold shift in the board balance of power: welcome report of non-executives’, Financial Times, 21 January 2003
Dionne G. and Triki T. (2005), Risk Management and Corporate Governance: The importance of independence and financial knowledge for the board and the audit committee. HEC Montreal Working Paper no 05-15. Department of Finance and Canada Research Chair in Risk Management, HEC Montreal, Canada
Donaldson, M. (2000) Harvard Business Review on Corporate Governance, USA: Harvard Business School Press,
Ernst & Young (2004), Audit Committees Survey: Banking and capital Markets Firms, Ernst & Young LLP
European Commission 1996, Green Paper-The role, position and liability of the statutory auditor in the European Union, Brussels, Belgium, Commission of the European Communities
European Commission 2004, Proposal for a Directive on Statutory Audit of Annual Accounts and Consolidated Accounts, Brussels, Belgium, European Commission
Fama, E.F. (1980), ‘Agency problems and the theory of the firm’, Journal of Political Economy, 88: 288-307
Felo, A.J., Krishnamoorthy, S., Solieri, S.A. (2003), ‘Audit Committee Characteristics and the Perceived Quality of Financial Reporting: An Empirical Analysis’, available at URL:http://www.ssrn.com/abstract=401240
Felton, R., and Watson, M., (2002), ‘Change across the board’, The McKinsey Quarterly, n.4: 40
Felton, R., (2004), ‘A new era in corporate governance’, The McKinsey Quarterly, n.2: 28-41
Gendron, Y., Bedard J. and Gosselin, M. (2004), ‘Getting Inside the Black Box: A field study of practices in “Effective” Audit Committees’, Auditing: A Journal of Practice and Theory, v.23:153-171
Goodwin, J. and Yeo, T.Y. (2001) ‘Two Factors Affecting Internal Audit Independence and Objectivity: Evidence from Singapore’, International Journal of Auditing, n.5:107-125
Grantham, R. (2004), ‘Corporate Governance codes in Australia and New Zealand: propriety and prosperity’, University of Queensland Law Journal, v. 23, n.1:218-225
Gray, S.J. (1988), ‘Towards a theory of cultural influence on the development of accounting systems internationally’, Abacus, 24, (1):1-13
Greenbury Report 1995, Study Group on Directors’ remuneration, available at URL: http://www.ecgi.org
Gwilliam, D. and Kilcommins, M. (1998) ‘The impact of Audit Firm Size and Audit Committee on Perceptions of Auditor Independence and Financial Statement Reliability in Ireland’, The Irish Accounting Review, v.5, n.1:23-56
Harris, M. (2006), ‘How good audit committees get the job done’, CA magazine, Jan/Feb: 16
Harrison, J. R. (1987), ‘The Strategic Use of Corporate Board Committees’, California Management Review, 30:109-125
Healey, M.J. and Rawlinson, M.B., (1993) ‘Interviewing business owners and managers: a review of methods and techniques’, Geoforum, v.24, n.3:339-355
Hellenic Capital Market Commission 1999, Code on Corporate Governance, Athens, Greece, Hellenic Capital Market Commission
Hellenic Capital Market Commission 2000, A code of conduct for companies listed in the Athens Stock Exchange and their affiliated persons (Rule 5/204/14-11-2000), Athens, Greece, Hellenic Capital Market Commission
Hellenic Government 2002, Law 3016 on Corporate Governance, board remuneration and other issues, Athens, Greece, Hellenic Government
Higgs, M. (1999) Senior Management Teams: What makes for Success?. Working Paper Series, no:9912. Henley Management College, UK
Higgs, D. (2003) Review of the role and effectiveness of non-executives directors, The Stationery Office, Department of Trade and Industry, available at: URL: http://www.dti.gov.uk
Hofstede, G., (1983), ‘The cultural relativity of organizational practices and theories’, Journal of International Business Studies, v.14, n.2, Fall: 75-89
Hofstede, G., (1991) Culture and Organization: Software of the Mind. London: McGraw-Hill
Hofstede, G., (2001) Culture’s Consequences (2nded.). Beverly Hills, USA:Sage
Hopwood, A.G., (1987), ‘The archaeology of accounting systems’, Accounting, Organizations and Society, v.12, n.3:207-234
Institute of Internal Auditors 2002a, Practice Advisory 1110-2: Chief Audit Executive (CAE) reporting lines, Florida, USA, The Institute of Internal Auditors
Institute of Internal Auditors 2002b, Recommendations for Improving Corporate Governance: Presented to the New York Stock Exchange, available at www.theiia.org
Institute of Internal Auditors Research Foundation 2003, Internal Audit and Organizational Governance, Florida, USA, The Institute of Internal Auditors
Institute of Internal Auditors 2004, International Standards for the Professional Practice of Internal Auditing, available at www.theiia.org
International Accounting Standards Committee (IASC) 1996, International Accounting Standards. London: Staples Printers Rochester
International Federation of Accountants 2003, Proposed revised code of ethics for professional accountants, available at URL: www.ifac.org
Jankowicz, A.D. (2005) Business Research Projects (4th ed), London: Thomson Learning
Jensen, M.C. (1993), ‘The modern industrial revolution, exit, and the failure of internal control systems’, Journal of Finance, 48: 831-880
Johnson K. and Scholes, (2001) Exploring Corporate Strategy, (2nd ed.) UK: Blackwell Publishing.
Jones, M., Carey, A. and Hunt, J. (2001) The Effective Audit Committee: A Challenging Role. London: ICAEW
Kalbers, L.P. and Fogarty, T.J. (1993), ‘Audit Committee Effectiveness: An Empirical Investigation of the contribution of power’, Auditing: A journal of practice and theory, vol.12 (no.1):24-48
Keasy, K. and Wright, M. (1997), Corporate Governance: Responsibilities, Risks and Remuneration. USA: Wiley & Sons
Keinath, A.K. and Walo, J.C. (2004), ‘Audit Committees Responsibilities: Focusing on Oversight, Open Communication, and Best Practices’, The CPA Journal, November
Kim B. (2003), ‘Recent Developments: Sarbanes-Oxley Act’, Harvard Journal on Legislation, vol.40:235-252
King, R.G and Levine, R. (1993), ‘Finance and Growth: Schumpeter might be right’, Quarterly Journal of Economics, v.108: 717-737
Koutoupis, A. (2004), ‘Corporate Governance and Internal Control Systems’, Economic Chronicles Journal, n.126.
Koutoupis, A. (2005), ‘Internal Audit and Corporate Governance in Greece’, Paper presented at the 3rd European Academic Conference on Internal Audit and Corporate Governance, Cass Business School, City University, London, UK, 6-8 April 2005
KPMG (2003a), ‘Audit Committee Quarterly-Fall 2003’, Audit Committee Institute, available at URL: http:// www.kpmg.com/aci
KPMG (2003b), ‘Building A Framework for Effective Audit Committees Oversight’, Audit Committee Roundtable Highlights, Audit Committee Institute, available at URL: http:// www.kpmg.com/aci
KPMG (2004), ‘Exploring Expectations of Audit Committee Effectiveness’, Audit Committee Roundtable Highlights, Audit Committee Institute, available at URL: http:// www.kpmg.com/aci
Krishman, J., (2005), ‘Audit Committee Quality and Internal Control: An Empirical Analysis’, The Accounting Review, v.80:649-675
Levitt, A., ‘The numbers Game’, speech presented at the New York University, Centre for Law and Business (Washington DC, USA, Sep.1998,www.sec.gov/news/speeches/spch220.txt
Livingston, P. (2003), ‘Financial Experts on Audit Committees’, Financial Executive, Jan-Feb: 6-7
McMullen, D.A., (1996), ‘Audit Committee Performance: An Investigation of the consequences Associated with Audit Committees’, Auditing: A Journal of Practice and Theory, vol.15:87-103
Menon, K. and Williams, J. (1994), ‘The use of audit committees for monitoring’, Journal of Accounting and Public Policy, v.13 (n.1):121-139
Miles, M.B. and Huberman, A.M. (1994) Qualitative Data Analysis (2nd ed). CA, USA: Sage publications
National Association of Corporate Directors (NACD) 2000a, Report of the NACD Blue Ribbon Commission on Audit Committees: A Practical Guide, Washington DC, USA, National Association of Corporate Directors
New York Stock Exchange 1940, Independent Audit and Audit Procedures, Accountant 122, No. 4, (April 6, 1940), p.383
Neuman, W.L., (2000) Social Research Methods (2nd ed.). London, UK: Allyn & Bacon
Noland T.G, Nichols, D and Flesher, D. (2004), “Audit Committee Effectiveness in the Banking Industry”, Management Accounting Quarterly, Vol.5 (n.3)
Organization for Economic Co-Operation and Development (OECD) 1999, OECD Principles of Corporate Governance, Paris, France, Organization for Economic Co-Operation and Development
Organization for Economic Co-Operation and Development (OECD) 2004, The OECD Principles of Corporate Governance, OECD Observer
Papas, A. (1993) European Financial reporting: GREECE, London: Routledge
Patton, M., 1990, Qualitative Evaluation and Research Methods, 2nd ed. USA: Sage Publications
Peters report (Commissie Peters) 1996, Recommendations on Corporate Governance in the Netherlands, Amsterdam Stock Exchange
Power, M. (1997), Audit Society: Rituals of Verification. Oxford:OUP
Powers W., Troubh, R. and Winocur, H. (2002), Report of investigation by the special investigation committee of the board of directors of Enron Corp. Feb. 1, 2002. Houston, TX, USA:Counsel: Wilmer, Cutler and Pickering
Preda report 1999, Codice di Autodisciplina (Report and code of conduct, Committee for the Corporate Governance of Listed Companies), Milano, Italy: Borsa Italiana, available at URL: http://www.borsaitalia.it
PriceWaterhouseCoppers Canada, (1998), Statement by D.W.Smith (new Chair of PriceWaterhouseCoopers Canada following the merger of PriceWaterhouse and Coopers & Lybrand). Press release (archived originally on the PriceWaterhouseCoppers Canada website but no longer available)
PriceWaterhouseCoppers, (2003), Audit Committees: Good Practices for meeting market Expectations, available at URL: www.pwc.com/corporatereporting
Prince, C. (2005) ‘What leading bankers think about sustainability’, Financial Times, 28 November 2005.
Public Oversight Board 1993a, In the public Interest: A special report by the Public Oversight Board of the SEC Practice Section. Stamford, CT, USA, American Institute of Certified Public Accountants
Public Oversight Board 1993b, Issues Confronting the Accounting Profession. Stamford, CT, USA American Institute of Certified Public Accountants
Quinn, R. and Cameron, K., (1983), ‘Organizational life cycles and shifting criteria of effectiveness: Some preliminary evidence’, Management Science, v.29, n.1: 33-51
Ragin, C. (1994) Constructing Social Research. Thousand Oaks, USA: Pine Forge Press
Report of the High-Level Group of Company Law (2002), Experts on a Modern Regulatory Framework for company Law in Europe, Jaap Winter report
Richardson, R.C. and Baril, C.P. (2003) ‘Can Your Audit Committee Withstand the Market's Scrutiny of Independence?’ Financial Executive, v.19 n.1: 35-38
Robson, C. (2002) Real World Research, (2nd ed.). Oxford, UK: Blackwell
Rosen R. (2003), ‘Risk Management and Corporate Governance: The case of Enron’, Connecticut Law Review, Vol. 35:1157-1184
Rubin, J. and Rubin, I.S. (1995) Qualitative Interviewing: The Art of Hearing Data. Thousand Oaks, USA: Sage publications
Sarbanes-Oxley Act (2002), Public Law 107-204. U.S. 107th Congress
Sarens G. and De Beelde I. (2006) Interaction between internal audit and the audit committee: An analysis of expectations and perceptions. University of Gent Working Paper no: 357. Department of Accounting and Corporate Finance, University of Gent, Belgium.
Saunders, M., Lewis, P. and Thornhill, A. (2006) Research Methods for Business Students (4th ed). London, UK: Prentice Hall
Scharff, M.M., (2005), ‘Understanding WorldCom’s Accounting Fraud: Did Groupthink Play a Role?’, Journal of Leadership & Organizational Studies, v.11, n.3:109-118
Securities and Exchange Commission 1980, Division of Corporate Finance, Staff report on Corporate Accountability, Washington, U.S. Government Printing Office
Securities and Exchange Commission 2003, Release n.33-8238, Washington, available at URL: http://www.sec.gov/rules/final/33-8238.htm
Shandor, J., (1989), ‘Audit Committees Take a Broader Role in Corporate policy’, Corporate Controller 2, Nov-Dec: 46-48
Silvermann, D., (2000) Doing Qualitative Research: A practical Handbook. London, UK: Sage
Smith Report 2003, Audit Committees Combined Code Guidance, Financial Reporting Council, available at URL:http://www.frc.org.uk/publications
Smith, C. and Stulz R. (1985), ‘The Determinants of firms’ hedging policies’, Journal of Financial and Quantitative Analysis, v. 20, is.4:391-405
Song, J. and Windram, B., (2000), ‘Benchmarking Audit Committee Effectiveness in the UK’, available at URL: http://ssrn.com/abstract=249865
Sosic, J. and Jung, D. (2002), ‘Work-Group Characteristics and Performance in Collectivistic and Individualistic Cultures’, The Journal of Social Psychology, v.142, n.1:5-23
Spangler, W.D., and Braiotta, L. Jr., (1990), ‘Leadership and Corporate Audit Committee Effectiveness’, Group and Organizational Studies, June: 134-157
Spanos, L., (2005), ‘Corporate Governance in Greece: developments and policy implications’, Corporate Governance, vol.5 (no.1):15-30
Spencer, A., (1983) On the edge of the organization: The role of the outside director. Chichester, USA: John Wiley
Spira, L.F. (1998), ‘An Evolutionary Perspective on Audit Committee Effectiveness’, Corporate Governance: An International Review, vol.6 (no.1):29-38
Spira, L.F. (2002) The Audit Committee: Performing Corporate Governance. Boston, USA: Kluwer
Spira, L.F. (2003), ‘Audit Committees: begging the question?’, Corporate Governance, v.11, n.3, July.
SRI International 1987, Investor Information Needs and the Annual Report, Financial Executive Research Foundation, NJ, USA, Financial Executive Institute
Steinberg, R.M. (2005), ‘How Audit Committees Best Carry Out Responsibilities’, available at http://www.complianceweek.com
Stulz, R., (1984), ‘Optimal Hedging Policies’, Journal of Financial and Quantitative Analysis, v.19, issue 2:127-140
Stulz, R., (1990), ‘Managerial Discretion and Optimal financing policies’, Journal of Financial Economics, v.26, issue 1:3-28
Ta Nea, Greek daily newspaper (25 February 2006)
Terrell, M. and Reed, S. (2003), ‘Audit Committees – A more visible and demanding role’, Corporate Governance: A Guide to Corporate Accountability, Fall 2003
The Institute of Chartered Accountants in England and Wales (ICAEW) 2003, Guidance for audit committees: Evaluating your auditors. London, UK: The Institute of Chartered Accountants in England and Wales
Thomopoulos, P. (2006), The Greek Economy and its Outlook, Speech, available at http://www.bankofgreece.gr/en/announcements
Thomson, L.L. (2004), Making the Team: A guide for managers” (2nd ed.). USA: Pearson Prentice Hall
Treadway Commission (NCFFR) 1987, Report of the National Commission on Fraudulent Financial Reporting, Washington, USA, National Commission on Fraudulent Financial Reporting
Tricker, R.I. (1978) The Independent Director-A study of the Non-Executive Director and of the Audit Committee. London, UK: Tolley Publishing Ltd.
Tricker, R.I. (1994) International Corporate Governance: Text, Readings and Cases. Singapore: Simon and Schuster
Tricker, R.I (2000) Corporate Governance (History of Management Thought). UK: Ashgate Publishing
Turley J. (2002), ‘The future of corporate reporting: From the Top’, Financial Executive, Dec.2002:54-56
Turley, S. and Zaman, M. (2004), ‘The Corporate Governance Effects of Audit Committees’, Journal of Management and Governance, v.8:305-332
Turnbull Report 1999, Internal control: Guidance for Directors of Listed Companies Incorporated in the United Kingdom. London, UK: Institute of Chartered Accountants in England and Wales
U.S. General Accounting Office (2003), GAO Forum on Governance and Accountability, Challenges to restore public confidence in U.S. corporate governance and accountability systems. USA, U.S. General Accounting Office available at URL: www.gao.gov
Vanasco, R.R. (1994) ‘The Audit Committees: An International Perspective’, Managerial Auditing Journal, v.9, n.8: 18-40
Van Hoek, A. (1988), Audit Committees and the Internal auditor, Proceedings of the 2nd European Conference of the Institute of Internal Auditors, Brussels
Vienot I Report 1995, The board of directors of listed companies in France, Conseil National du Patronat Français (CNPF) & Association Francaise des Entreprises Privees (AFEP), available at URL: http://www.ecgi.org
Watts, R. & Zimmerman, J. (1983), ‘Agency problems, Auditing, and the Theory of the Firm: Some Evidence’, Journal of Law and Economics, v.26:613-633
Wild, J. (1994) ‘Managerial Accountability to Shareholders: Audit Committees and the Explanatory power for Returns’, British Accounting Review, 26:353-374
Wild, J. (1996) ‘The Audit Committee and Earnings Quality’, Journal of Accounting, Auditing and Finance, 11(2):247-276
Williams, H.M. (1977), ‘Audit Committees-The Public Sector’s View’, Journal of Accountancy, v. 144, n.3:71-74
Williamson, O.E. (1984), ‘Corporate Governance’, Yale Law Journal, 93: 1197-1230
Wolnizer, P.W., (1995), ‘Are audit Committees red herrings?’, Abacus, 31 (1):45-66
World Bank 2000, Corporate Governance: A Framework for Implementation, Paris, France: World Bank
Yin, R.K. (2003) Case Study Research: Design and Method (3rd ed.). London, UK: Sage
Zong, L., (2004), ‘The road to stronger corporate governance’, The Corporate Board, March/ April: 16-21
Σε περίπτωση που επιθυμεί κανείς να λάβει το πλήρες Paper με τους πίνακες μπορεί να επικοινωνήσει με τον συγγραφέα στο akoutoupis@ba.aegean.gr.
Το Paper αυτό παρουσιάσθηκε στο 8ο Ακαδημαϊκό Συνέδριο για την Εταιρική Διακυβέρνηση και τον Εσωτερικό Έλεγχο που διοργανώθηκε από το Πανεπιστήμιο Αιγαίου (τμήμα Διοίκησης Επιχειρήσεων (Χίος)) σε συνεργασία με αρκετά ακόμη Ευρωπαϊκά Πανεπιστήμια τον Απρίλιο του 2010.
Εγγραφή σε:
Αναρτήσεις (Atom)
