Introduction: reputation. But unfortunately all the three companies were

Introduction:

Nowadays any business or a
person wants success in his any kind of work than they need a proper planning.
Without follows these principal’s they never get good results. There are lot of
examples in the world that huge companies was liquidated only because they
didn’t follows that rules, and they also didn’t make proper planning to run his
business. The main examples in Australia are the three big companies these are
ABC Learning, HIH Insurance and One Tel. All these companies were very well
established and they had very huge capital with very good market reputation.
But unfortunately all the three companies were liquidated because they didn’t
follow the ethical rules and also the governance of these companies was not
good. Another main reason was that they didn’t maintain fair balance between
there asset and liabilities and as a results these companies were become
insolvent. The three main rules such as Ethics, Governance and liabilities now
discus one by one which are as follows.

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Ethics:

Ethics
means that rules and regulations are set by the professionals who help to
general public to run any kind of business and organization. “Business ethics
are the principals that guide the peoples that how they run their business, It
also make people able to take decisions in favor of the business and also
provide a guide line to distinguished between what is right and what is wrong
for the business”(Anglo American case study). Ethics make enable the business
to make proper rules and policies which the business in any issue use to
resolve these issues. Our universal system is running by follow a proper system
which is very big example of ethics. If this system does not follow that system
than all the universal system will destroyed. Similarly to run a successful
business application of ethical rules are very important. But unfortunately the
big companies ABC Learning HIH Insurance and One tell didn’t follow the ethical
rule which was the reason for liquidation. Business ethics guide us to run a
business to make profit not to cheat the people in a society. If the purpose of
a business to cheat the people and make money by a wrong way that action will
be against the ethical way of business, in the end the business will lose his
good will and as result that business will liquidate same like the three big
companies HIH Insurance, ABC Learning and One tell.  

 

 

Governance:

 

Governance means to run and
control the business or any group of people in productive way. If the result of
the business or a company in form of profit than it can be say that the
governance in the company is very good. In good governance the representative
need to make good policies, rules and regulations to run any society or a
business in well manners. Governance in any business is very important and
compulsory because it will make the team work very efficient and productive.

What is governance
framework?

“A good governance framework
is an organized structure and a set off rules that guide the people how they
organized and controlled the group of people and a business. Good governance
include to create well organized structure in an organization, create strategic
and business plan”(Vanessa McBrideI,
Isabelle Reinecke 2012). 

 

Liabilities:

Liability is a present
obligation that is payable by a business entity by a past events, the
settlement of which is expected to result in an outflow from the enterprise of
resources embodying economic benefits, (IASB Framework). There are many types
of  liabilities in a business for example
wages payable, loan payable, rent payable, interest payable Etc. For a business
point of view it is very important for every business to recognized and show
the liability in balance sheet. It is against the accounting rules if a
business steel his liability to show in balance sheet to increase his
reputation in market. If a business wants to run his business successfully then
he should have maintain a balance between the assets and liabilities. If the
liabilities are more than the assets than business cannot abele to meet his
debts. It is the responsibility of an auditor that he should disclose the
financial position of a business in his audit report. The reason is that in
market shareholders totally depend on the audit report of a business when they
invest in business. Banks also consider the audit report of company when they
issue the loan to the business.

 

HIH
Insurance:

History

“HIH Insurance was established
in 1968 by two person Ray Williams and Michael Payne and it was working as
small insurance company. After three years in 1971 the company became known as
a CE Health pty ltd and working as a third party accident insurance provider.
In 1992 company was registered in Australian Stock Exchange and became the
listed company. This company expanded very quickly and in 1998 it known as a
name of HIH Insurance” (Mirshekary, Yaftian & Cross). 

HIH and Audit Independence:

It is a fundamental rule and
market requirement that auditor should be independent and should be provided
all information which required for audit purpose. Auditor should not be
influenced by the company management and he must provide fair view about the
company position in his audit report. But unfortunately this rule was not
followed by the HIH auditor while doing the audit of HIH. The main reason is
that “Arthur Anderson was the auditor of HIH Insurance Company Since 1971 from
the date of HIH was established until 2001 company’s liquidation date. It was
founded that a good relationship became between the auditor and directors of
the company” (Mirshekary, Yaftian & Cross). Due to this relationship there
was a strong evidence that auditor was influenced by the company
management  and he madethe audit report
in favor of the business which is totally against the fundamental rule of CPA
and ICAA.

Ethics:

Ethical standard means that
make a choice between what is right and what is wrong. Auditor should be very
careful while doing the audit and he should be very ethical and provide the
audit report in favor of shareholders. Ethical collapse also became the main
reason of HIH Insurance Company. Investigation shoe that there was a doubt
between the facts and amount that show in the financial statement and actually
paid to the auditor. It was also noticed that auditor also charged extra fee
except the audit fee which made the case more doubtful (Mirshekary, Yaftian
& Cross).

 

One
Tell:

In 2001 when One Tell was
collapsed it was the fourth largest telecommunication company is Australia and
it had more than two million customers and operating in eight countries. The
collapse of the One Tell was very shocking news foe the telecommunication world
in Australia (Australian Broadcasting Corporation 2001, Cooke 2001). In 90’s
One Tell expanded his business very quickly. Its customers were increasing day
by day. In 1996-97 its expense was A$ 98.71 million and in 1999-2000 the
expenses was A$ 648.80. Which show that his expense was increased more than 500
% within four years (Barry 2002). Due to huge increase in expenses the operating
loss of One tell company was in big amount. Dramatically increased in expenses
was big example of lack of finance management in One Tell. In October 2000
Merchant bank also issued a warning to the company that in future the company
will be faced shortage of cash. 

Governance:

Lack of corporate governance
also plays a role in liquidation of the company. When we examine the
fundamental principles which are the make proper balance of authority between
the employees, communication of information between the boards of directors,
Issue fair and understandable financial report every years, maintenance of
sound internal control system (O’ Shea 2005). When we applied these standard on
One Tell we find that many of these principles didn’t followed by the company
which was the main reason of the liquidation of the company.

ABC
Learning:

ABC Learning was founded in
1988 Edmund Eddy Groves and his wife Le Neve Groves in Brisbane, Queensland. In
Australia mostly the child care organizations are non-profit and run by the
government. In 1996 ABC Learning run’s 18 child care centers. ABC was expanded
very quickly and he increased his operation in Australia United State and
United Kingdom. Documents show that ABC Learning earned very huge profit and
its share value also increased every quickly, (Mak yuen teen). The first reason
for the liquidation of ABC Learning was that he did not followed accounting
standards. The recognition of assets was not according to the accounting rules.
His accounting treatment related to assets, for example good will and childcare
license was not according to the actual price, and also not according to the
proper accounting calculation, (Mak yuen teen).  

In 2005 the Australian
institute carried a survey from the staff of the ABC Learning to check the
quality of services that they provided to the children for all day. The result
of that survey was not good which suggests the need for investigation. This
survey also showed that the staff performance was also not good, only 29% of
the staff was working on making a good relationship. 15 % respondent said that
their center hired more staff than legally required. 37 % respondent said that
they have enough equipment was provided to the children. Some respondent said
that there were some systematic barriers on the provision of the quality work.
Most of the staff specially the experienced cook was under paid, (Rush e,
Downie, C).

 

 

Conclusion:

The three companies ABC
Learning, HIH Insurance and One tell were very big and with large amount of
investment. All the three companies were ranked in top 5 companies in
Australia. But unfortunately all three was liquidated there are some reasons.
Some people believe that for a successful business we only need huge
investment, these three companies are big example for them. All three companies
had huge investment large amount of working capital and all these was well
known in the market. All these had good will and large amount of customers in
the market. The reason for the liquidation was that all three companies were
not following the system. They didn’t follow the all accounting standard and
rules & regulations that imposed by the experts and the government
authorities. Another very important for successful business is that they should
provide true and fair financial statement to the general public. The most
important principle is that the services that provide by the business should be
good and better quality than business will be successful.  

  

 

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