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May 02, 2023


Changes In Corporate Governance Of Freedom Foods Group Limited

The consequence of the auditor`s legal liability because of negligence is that the auditor can choose whether to violate the auditing standards or comply with them (rothenberg 2020, p1(2)). In freedom foods group limited, deloitte violated the auditing standards by devising an audit strategy to help the group`s management commit fraudulent financial reporting ( 2022). Freedom foods group limited has brought key changes in its corporate governance in the post-accounting-scandal period. These changes are discussed below:

  • Stuart black am has been appointed as a new independent non-executive director and chair of the finance and audit committee ( 2022, p1(8)). It is a key step to strengthen the group`s corporate reporting processes and framework for internal control over financial reporting.
  • Genevieve gregor has been appointed as independent chair of the board. It is a key step to strengthen the group`s corporate governance framework as the independent chair helps the board carry out its primary duty, which is monitoring the management of the group on behalf of the shareholders.
  • Freedom foods group limited has ensured that a majority of independent non-executive directors are on the group`s board. Independent non-executive directors act as a coach, mentor and guide to the group ( 2022, p2(1)). The majority of these directors enhance the group`s corporate credibility and governance standards by acting as a watchdog to manage related financial reporting risks.
  • The management has updated the key governance policies, processes and charters of the board. The aim is to strengthen the finance and audit committee and risk and compliance committee.
  • The risk management framework, risk management processes and practices have been revised and updated. This change has been brought for assuring the integrity of the group`s financial statements, which is based on a sound risk management mechanism. It prevents the occurrence of financial reporting fraud.
  • An internal audit function has been established, and an experienced internal auditor has been appointed as head of internal audit. This internal audit function can largely contribute to the detection and management of fraud by establishing a healthy relationship with the audit committee and the external auditor (drogalas et al, 2017, p438(1)).
  • A comprehensive executive remuneration framework has been developed with proper long-term and short-term incentives for promoting expected behaviour, incentivising attainment of business objectives and aligning with the shareholders` value.
  • A risk appetite statement has been developed that is appropriate with the scale and complexity of the group`s business. It has been developed by reviewing the group`s size, the industry in which it operates, business mix, and its ability to accept and manage different types of risks ( 2022, p2(6)).
  • An experienced corporate governance lawyer has been appointed as the group general counsel and company secretary.

All these changes aim to ensure that proper governance is established over the financial reporting framework of the group, which is key to preventing any financial reporting fraud by the collaboration between the senior management and external auditors. These changes also ensure that the external auditor is not negligent in his/her work.    

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