Early Warning Signals of Corporate Collapse - Rats Desert the Sinking Ship

Rats desert the sinking ship is an old English proverb which is used to indicate that people start to bail out on a project or abandon colleagues at the difficult times.  

In old wooden ships there would always be rats on board. When the ship is about to sink the rats jump off and start swimming toward a safer place. It is said that that rats could instinctively detect the imminent collapse before human could. When rats leave a ship this is an ominous sign that the ship would sink.

Car Dealership Market in Australia

Introduction

Success of any business depends on how well it has analysed its external environment (micro and macro) and its own business. This understanding is crucial for businesses to survive, sustain and reap advantages from opportunities and to combat threats from external forces. An industry analysis is of paramount importance for any business to analyse various trends, degree of competition market share. Similarly, business can understand its own strengths and weaknesses by addressing external threats and opportunities from external market by through SWOT analysis.

In this backdrop, purpose of this article is to understand both macro and micro environmental characteristics influencing on car dealership market in Australia and then to develop a SWOT analysis for a top major players in the industry and to make recommendations.

Choice of accounting policies

Introduction

Australia follows the principle-based accounting standards which gives the preparers the options to choose among the accounting policies and highlight the reporting under substance over form (Psaros, 2007). Unlike the rule-based accounting, under principle based accounting method there is a high chance of exercising the creative accounting. “Studies have shown that accounting choices are influenced by a range of contracting, financing and operational factors (Shah, 1998, p. 83)”. In this backdrop the purpose of the report is to analyse the choice of accounting methods of a selected company in Australia.

The tax treatments of Australian small businesses in Taxation Law

1 Introduction

Tax provisions relating to the small businesses in Australia dated back to Simplified Tax System (STS) rule enacted by Division 328 ITAA 1997 and applied to the income years commencing from 2001. These small business concessions were added to ITAA 1997 as a result of New Business Tax System (Capital Gains Tax) Act of 1999. Though the motive was to simplify the tax regime and to reduce the tax compliance cost it attracted much criticism despite the amendments made later on to streamline the different provisions[1]. As a result in order to standardise the tax concessions which had many definitions across the legislations, Small Business Entities (SBE) regime was introduced in 2007 and was in effect from 1^st July 2007 income year and from 1^st April 2007 for the Fringe Benefit Tax (FBT) purposes[2]. Since then there has been number of attempts to grant concessions to the SBEs. The most notable and the recent change was to reduce the SMEs income tax to 25% and to broaden the SBE aggregate turnover threshold to $50 million progressively until the income year 2026–27[3].

BHP Billiton Ltd: Identification and assessment of business risk

Introduction

BHP being one of the major suppliers of minerals in the world and operating in multiple jurisdictions, it has exposed itself to a greater economic, political, socio-cultural and environmental risk. Together with the complexity of the business operations (ASA 315, 2015), these controllable and uncontrollable risks have pose an immense pressure on the entity’s management or those charged with governance in achieving its objectives and strategies. In this regard, the business risk, as defined in ASA 315.4 (b), is identified and assessed in the following section.

Strategic Performance Measurement System : Supermarket

1 Analysis of supermarkets industry in Australia

During the recent past, the supermarket industry has gone through some major challenges such as intense competition through the expansion of multinational chains to local cities, suppliers, customers, government regulations and most importantly the information technology (Mellado & Sánchez, 2005) and online marketing (Palmer & Markus, 2000). “The Supermarkets and Grocery Stores industry is one of the most fiercely competitive industries in Australia (IBIS World, 2017, p. 1)”. In order to cope with the challenges many supermarket resort to performance measurement systems.

INVESTOR RESPONSE TO AUDITORS GOING CONCERN OPINION

The collapse of well-established corporations around the world during period 2000 to 2002 reopened the debate about the auditors’ responsibility (Haron, et al., 2009; Herbohn, et al., 2007) and this increased tension led the auditors being subject to high level of scrutiny by the media, public and regulators (Careya, et al., 2012; Fargher & Jiang, 2008). Some argued that auditors have a duty to signal the external parties regarding the impending collapse of the business. Mostly regulators, politicians and the media have often criticized auditors for not flagging the users of the financial statements about the impending client failures (Carey, et al., 2008).

PPE: Relevance and Representational Faithfulness of Financial Reporting

Scope

For the purpose of the analysis of Property, Plant and equipment (PPE), AP Eagers Limited and the group (hereinafter referred as Company) general purpose financial statements for the financial year 2016 has been selected. The financial reporting practice of PPE is critically analysed with reference to the AASB 116 Property, Plant and Equipment, AASB 13 Fair Value Measurement, Framework for the Preparation and Presentation of Financial Statements (hereinafter referred to as Framework) and drawn inferences from the extant literature.

Value relevance of audit opinion

The sweep the corporate failure of large conglomerates around the world in early 2000 led the critiques to revisit the discussion of auditors’ due to care and accountability (Haron, et al., 2009; Herbohn, et al., 2007) and this heated forum brought the auditors to scrutiny of the public and regulators (Careya, et al., 2012; Fargher & Jiang, 2008). The noteworthy controversial debate was whether the auditors could be held responsible for not disclosing the financial distress or the financial misstatement of their client. In this campaign the regulative authority and the media have repeatedly condemned the auditors for not signalling the users of the financial statements regarding the impending corporate failure (Carey, et al., 2008).

Sustainability Reporting and Shareholder Perspective

With the wake of industrialization in the twenty first century, fuelled by technology and globalization, there has been an unfortunate destruction of natural resources, social injustice and suppression of civil rights and the native knowledge of indigenous people (Collins, 2012) in more subtle manner than ever before. The man’s quest for economic wealth maximization led the unfair treatment to the environment and society the exploitation of natural and human resources. Owing to these reasons, the way in which a corporate operates is scrutinized more rigorously by all stakeholders including the regulators and the financial press (Martı´nez-Ferrero & Banerjee, 2016). Thus, pure economic or the profit motive has questioned over the last few decades.

AN ECONOMIC ANALYSIS OF MEDICAL CANNABIS MARKET

Introduction

The purpose of this assignment is to analyse the economic impact the changes in medical cannabis market as outlined in given article. Recently the government of Australia has legalize the cultivation of medicinal cannabis to supply domestic patients.  This essay identifies the effect on the market forces by studying the changes made in Australian cannabis market. Then, these impacts were illustrated using demand and supply curves assuming other factors remain constant. The demand elasticity and the revenue impact is analysed by for cannabis medicine assuming it is an essential product. Finally, the externalities from these recent changes to the market have been analysed.

Service Quality in Australian Higher Education Sector

Over the past few decades there has been a perceptible continual progression of the service sector around the globe. Consequently, service industries are playing an increasingly important role in the economy of many nations (Abdullah, 2006a). In a world where the service sector is becoming the driving force of the economy, quality of the service has become paramount important for the service based organizations to cope with the intense rivalry. Unlike the quality of the product the assessing the service quality is a complex phenomenon due to the salient attributes of the service. Since 1970 service industry has been widely researched agenda drawing much of the researchers’ attention to the service quality models (Pena, et al., 2013).

Theoretical Background of Corporate Social Responsibility (CSR) Reporting

As a prelude to the discussion on theoretical perspective of CSR, this section focuses on the two distinct research approaches to CSR in the prior literature. Gray et al. (1995)[1] hold the view that the research in the field of CSR poles apart due to the inherent nature and certain conundrums in CSR for which includes; the lack of agreed theoretical perspective to research; the absence of systematic reporting by organizations and CSR evokes doubt about its legitimacy.

Can the auditors predict the bankruptcy prior to its collapse? Review of Previous Literature

Despite the increasing concern on the auditors to reveal the going concern ability of the client, it would be apparent from the literature reviewed that in many cases corporate failure was not perceived by a going-concern modified opinion in the independent auditor’s report. 

Use of Bankruptcy Prediction Models as an Auditing Tool

One of the best-known models for predicting corporate financial distress is the Altman’s Z-Score model (Altman, 1968, 1983, 1993). This model is constructed using linear relationship of financial ratios weighted by predefined coefficients. Initially the model was developed to assess the bankruptcy of publicly held manufacturers, but later it was re-estimated for private manufacturing, non-manufacturing and service companies. Therefore, the model is three folds: Z-model (original model); Z’-model (private firm model); Z’’-model (nonmanufacturing firm model). Eventually a firm is categorized based on its Z-score as non-bankrupt, bankrupt or gray area in each of the aforesaid three Z-score models.

Auditors' Responsibility - Disclosure of Corporate Collapse

Recent collapse of well-established business organizations around the world has intimidated the public investors to introduce new capital flows to the markets while some lose their investments. This chain of continuous corporate collapses had finally led to a global recession, threatening Sri Lankan companies to strive for their survival. Nowadays, the cost of bankruptcy of a single corporate has a fatal repercussion over the individual investors, other organizations and economy as a whole than in the past. Therefore, a mechanism of revealing the going concern ability of an organization prior to its collapse could avoid may pitfalls.