Latest effort at transparency just muddies water by Carolyn Pugsley Research Paper

Latest effort at transparency just muddies water by Carolyn Pugsley and Alexandra Module - Research Paper Example The article is written by Carolyn Pugsley and Alexandra Module. The main objective of the article is to state the reforms which are adopted by the federal government of Australia in order to disclose the remunerations of seniors executives of companies. This reform has been adopted by the Australian government with the intention of facilitating better transparency for shareholders with respect to the remuneration structures of senior executives. Moreover, this reform will facilitate management of companies with minimum regulatory pressure (Pugsley & Module, 2012). Accounting Theory (Part B) The appropriate theory for this article will be ‘Legitimacy Theory’. This theory states that the remuneration policy of an organisation is conducted in a legitimated manner in accordance with it the board of directors (BOD) of the organisation is required to justify that the remuneration policy adopted by them are according to the company law and Accounting Standards of Australia. Mor eover, the remuneration of BOD of organisations should be justified to the shareholders as well as society. The remuneration policy of senior executives is required to be revealed in order to ascertain that remunerations are provided in keeping with best practices under the code of corporate governance (AFAANZ, 2010). Analysis (Part C) The legitimacy theory signifies that the remuneration policy adopted by companies is in adherence with rules as well as regulations of the government. This theory also states that the financial and annual reports which are prepared by companies are in accordance with accounting standards and company law. In this similar context, the article depicts that the remuneration policy of senior executives will aid in determining that the remunerations as well as rewards which are acquired by senior executives are according to accounting standards. The theory signifies that the remuneration of senior executives should be revealed in an appropriate manner in an nual reports with the motive of depicting the performance of companies to stakeholders. Moreover, the theory assists in minimising pressure on the management as the audit committee is familiar with the regulations of remuneration policy. The article depicts that the amount of remuneration of the senior executives should be revealed in the financial statements or annual reports of companies which will signify the performance of companies among stakeholders and market segments. Companies are required to adopt appropriate remuneration policies which will be legally enacted. The article also reveals that the remunerations of the senior executive should be disclosed in order to ascertain transparency towards shareholders. Moreover, the disclosure of the remuneration policy will assist companies in better regulatory operations (Crombie, 2010). It has been observed from the article that the government of Australia has formulated policy with regard to the disclosure of remunerations of seni or executive. The policy devised by the government is perceived to be complex for auditors as the remuneration report will comprise three segments which include ‘past pay’, ‘present pay’ as well as ‘future pay’. Furthermore, annual reports of companies with excess or decreased incentives and remunerations will portray ineffective performance of companies. Companies should adopt an effective policy of representing remuneration of senior executive which can be linked with the companies’