The Audit Committee and its importance Literature review

The Audit Committee and its importance - Literature review Example The aim of this essay has been thus concentrated on reviewing selected literatures based on the importance of audit committee in the modern day business context, working as a monitor as well as a guarantor of viability in corporate financial reporting. The ultimate objective of the essay will further emphasise the power held by audit committee to affect the corporate financial operations following critical evaluation of secondary evidences. Discussion Historical Background Gendron & Be?dard (2006) revealed that it is owing to this rising pressure that organisations are driven towards maintaining transparency at every level of the managerial processes. Correspondingly, as financials hold considerable importance in managerial processes, the influence of audit committee also expands to a substantial extent. Drawing from this inference made by Gendron & Be?dard (2006), it can be affirmed that comparative to the traditional business contexts, competition and influences of external forces have increased in manifolds in the 21st century. These external forces, such as rising competition, globalisation, changing customers’ behaviour and governmental interventions further increase pressure on the organisation to perform and sustain in the industry. Emphasising the significance of audit committees, Cohen & et. al. (2002) further revealed that corporate governance, as a regulatory body of modern organisations, also imposes substantial impacts on the audit process’ significances and correspondingly on audit committees’ functioning. Notably, corporate governance itself is a modern concept of effective organisational management. Therefore, correlating the supervisory functions of corporate governance with the growing significance of auditing and audit committees shall be deemed rationale, when justifying the post modern advancements of corporate financial performances in comparison to the traditional forms. Considering these aspects, audit committees hav e been argued as a mosaic of corporate governance by Cohen & et. al. (2002), acting as the segment responsible for deterring fraud in the process of ensuring effective financial reporting. Making critical evaluations based on this presumption, Turley & Zaman (2007) revealed that the audit committees’ influences work stronger and more apparent outside the formal system followed when operating in alliance with corporate governance participants in an organisation. Turley & Zaman (2007) further argues that audit committees can be used for positive as well as negative intentions to gain governance control through political incentives within the organisation apart from applying its functions to raise transparency in the corporate reporting procedure. Based on the study of Turley & Zaman (2007), it can thus be inferred that on a positive note, audit committees may pressurise corporate participants to maintain transparency, but from a negative viewpoint, it also acts as a tool to obt ain greater power in the authoritative construction of the organisation. However, in either ways, audit committee is signified to hold considerable power in influencing the overall organisational effectiveness. Methodologies Cohen & et. al., (2002) initiated an

Cash wise company Term Paper Example | Topics and Well Written Essays - 1000 words

Cash wise company - Term Paper Example This assignment presents the results and analysis of financial ratios of a publicly traded company. We selected a company listed in the S&P 500 index. The comparison of nine sectors of S&P 500 index within five years of interval shows that the Health Care is the leading sector (â€Å"S&P Sector Performance†). Based on information provided in Table 1, we select AbbVie Inc (ABBV) for our study, and Abbott Laboratories (ABT), Amgen Inc (AMGN), Baxter Intl (BAX) as its competitors. Our selection is based on the beta value and market capitalization of the company (Table 1) and character of the historical stock prices shown in Figure 2. The stock prices of ABBV are stable and without noises. AbbVie Inc. is a pharmaceuticals company; it conducts extensive researches to treat diseases such as HIV, thyroid disease, Parkinson’s disease, chronic kidney disease and other complex diseases. AbbVies portfolio of products include HUMIRA, Synthroid, AndroGel, Creon, Kaletra, Norvir, Lupron, Niaspan, TriCor, TRILIPIX, Synagis, Duodopa, Dupa, Zemplar (â€Å"AbbVie†). Financial ratios are used to assess a company’s performance and position in the competitive landscape of business. It allows measuring the company’s performance across time and among its competitors. Our objective of this study is to evaluate AbbVie Inc.’s financial ratios for years from 2012 to 2014 and compare them with ratios of its competitors. Financial ratios are divided into four categories: profitability, efficiency, liquidity, and leverage. Profitability Ratios. A company’s principal goal is to make a profit. Assets and operational activities employed in the company are assigned to achieve this goal. Profitability ratios measure a company’s ability to generate profit. There are several profitability ratios. This assignment uses Net profit margin, Return on assets, and Return on equity. Efficiency Ratios. Assets and liability are two important issues of a