Archived News for Executives and Senior Management

Accountants and auditors should recognise that a company's culture and 'tone at the top' can have a profound impact on operational safety, risk-taking, and ultimately, financial position, according to Professor Russell Craig, Head of Victoria University's School of Accounting and Finance, and his co-researchers.

In a paper published in the New York State Society of CPAs in the CPA Journal, Professor Craig, Professor Joel Amernic (University of Toronto), and Professor Dennis Tourish (Royal Holloway, University of London), argue that a company's corporate culture – and its impact on safety operations – must be assessed and given due acknowledgement if audited financial statements are to be fair and accurate.

Using BP's 2010 Deepwater Horizon oil spill as a case in point, the researchers say that auditors should broaden the notion of what an audit is, so that operational risks generated from a company's culture and management tone are factored into potential liabilities.

The researchers present evidence to suggest that BP's 'tone at the top' and corporate culture (and consequently its management and operational systems) were dysfunctional. Not only did the company have a poor safety record, but another disaster appeared almost inevitable.

"A close examination of BP's tone at the top and consequent culture reveals a h­igh likelihood that a major man-made safety-related disaster would befall BP every few years...[Yet] no acknowledgement of the company's susceptibility to disaster was included in the company's financial reports or was identified by conventional auditing procedures," the paper notes.

"In such circumstances, in the interests of fairness of presentation, we submit that a provision for disaster should have in fact been made in the accounts."

The absence of a "provision for disaster" in BP's financial statements – one that would take into account the array of environmental and legal costs that would follow a future major disaster – meant that BP's audited financial statements did not comply with the  "fairness of "presentation" objective outlined in International Financial Reporting Standards (IFRS), the researchers argue.

Professor Craig said that while it would have been impossible for BP to predict which of its operations would be the site of a future disaster, "there was a strong case that a liability existed and was growing by the year".

If financial statements are to be the fair presentations that they claim to be, he said, auditors needed to take a more holistic approach and scrutinise more than just the numbers.

"These things have an impact -- a corporate culture that over-values cost-cutting to the detriment of safety will more than likely have financial consequences down the line -- so they should be taken into account by auditors if the provision of fair and accurate financial statements is the goal," Professor Craig said.

The Australian Food and Grocery Council has announced the appointment of Gary Dawson as the group's new Chief Executive Officer. Mr Dawson will begin his role at the end of July.

Westpac banking group has announced that Carolyn Hewson will be stepping down from the Board at the end of the month following an eight-year tenure with the bank.

Air New Zealand has announced the appointment of Christopher Luxon as the company’s new Chief Executive Officer, replacing Rob Fyfe who departs at the end of December.

Business advocacy group Business SA has announced it has appointed Nigel McBride as the group’s new CEO following an extensive search process.

The Federal Government has passed an amendment to the Corporations Amendment Act 2011 that will clarify how the chair of an annual general meeting may direct proxy votes.

New Zealand construction giant Fletcher Building has announced Jonathan Ling will retire from the position of Chief Executive Officer and Managing Director at the end of September, to be replaced with Mark Adamson.

Cloud computing specialist NextDC has announced the appointment of Craig Scroggie as the company's new Chief Executive Officer, replacing Bevan Slattery who will continue as Executive Director and Chairman.

The University of Canberra Union (UCU) has appointed former Wallabies and Brumbies player Joe Roff as its Chief Executive Officer.

The Australian Broadcasting Corporation (ABC) has announced it has appointed Lynley Marshall as the group’s new CEO, ABC International.

Energy Industries Superannuation Scheme has announced the appointment of Alex Hutchinson as the group’s new Chief Executive Officer.

Paul Ingleby, the former Chief Financial Officer of the Australian Wheat Board (AWB), has admitted to breaching his duties as on officer surrounding the Oil-for-Food Programme.

The Western Australian Government has announced the appointment of Kieren Kinsella as the chief executive officer of the recently established Metropolitan Redevelopment Authority (MRA).

The Federal Government has welcomed the appointment of Dr Diane Watson as the inaugural Chief executive Officer of the National Health Performance Authority (NHPA).

The worsening sovereign debt situation and general global uncertainty are beginning to effect the general outlook of the country’s Chief Investment Officers (CIO) according to the latest Financial Services Council Chief Investment Officer Index.

Logistics giant Brambles has announced its Chief Financial Officer, Greg Hayes, has indicated his intention to retire from the company. Mr Hayes will step down from the company’s Board in October, but will remain in his CFO position until March next year to facilitate a smooth transition to his successor.

The Federal Government has nominated Sussan Pascoe to become the first Commissioner of the new Australian Charities and Not-for=profits Commission (ACNC).

The Australian Rugby League Commission has announced David Gallop will stand down from his position as CEO following a ‘mutual agreement’ struck with the board.

The Federal Government has announced the appointment of Professor Aidan Byrne as the new CEO of the Australian Research Council.

The Australian Constructors Association has announced the appointment of Lindsay Le Compte as the association’s new Executive Director.  Mr Le Compte will take the role after Jim Barrett retires after 17 years in the position.