Tax, Audit and Corporate Governance
In this module, you will gain an in-depth understanding of Corporation tax, Audit and Corporate Governance. Corporation tax is the amount of tax a business organisation pays to the government on its profits. However, the accounting profits are often different from the taxable total profit on which the corporation tax is charged because certain incomes and expenditures that are allowed for accounting purposes are often not allowable for the tax purposes. In this module, a range of tax calculations are explored including: inheritance tax and capital gains tax. Inheritance tax arises when a transfer of chargeable property is made by a chargeable person. A capital gains tax is paid by a chargeable person on the disposal of a chargeable asset. The module also discusses the concepts of tax avoidance and tax evasion. Where, tax evasion can be defined as concealing information from the tax authorities or deliberately providing them with false information with the motive of evading taxes. Although there is no formal definition of tax avoidance, it could be defined as the careful tax planning with a motive of reducing the tax liability in a lawful way.
An audit could be defined as the process that enables auditors to express an opinion whether the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework and reflect a true and fair view of a company’s financial affairs (ICAEW, 2013). In this module you will learn about the objectives and importance of auditing and audit independence. Auditors must comply with the code of ethics issued by the International Federation of Accountants (IFAC). Independence is extensively discussed as a code of ethics in the modern business environment because auditors usually form numerous business relationships with their clients, which poses a threat to their independence. IFAC has categorised the threats to auditors’ independence into six categories: Self Interest threat, Self-Review threat, Advocacy threat, Management threat, Familiarity threat, Intimidation threat. The module also explains the audit implication on the efficient market hypothesis. Subsequently, the audit process is explored.
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The UK corporate governance code was formulated in 1992 with the objective of improving the governance in businesses. Since shareholders do not actively participate in the day-to-day management of a business and rely on the directors to run the company, the purpose of the UK corporate governance code is to ensure that the interest of the shareholders is protected.
This module will explore the objectives of Corporate Governance Code as well as the importance of Corporate Governance Code. The module explains the Comply or explain approach. You will gain a comprehensive understanding of the five principles of the corporate governance code, which are the following: Leadership, Effectiveness, Accountability, Remuneration and Relations with shareholders. Lastly, you will learn the differences between the UK code of corporate governance and the US code of corporate governance.
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