+91-9519066910
  • My Account
  • solution

    Accounting

    CW ACC701 Accounting Financial

    Rating:
    CW ACC701 Accounting Financial


    Introduction

    When the ability of the organisations to pay its obligations goes beyond its maximum capacity, liquidation is being announced for the organisations in order to stop the business completely in this respect. In order to follow this procedure, certain processes are needed to be implemented by the management in terms of the governmental policies in this respect. Beside this, the role of the liquidators is also important in this respect in terms of settling the several aspects inclined in the business such as the lending, credits, various demands of the stakeholders inclined with the business in this respect. Beside this, certain drawbacks which are being associated with the company which leads towards the insolvency of the company is also being taken into consideration in this respect such as the business policies, internal control deficiencies and corporate governance failures in this respect.

    As the primary objective of the report, the major concerns regarding three major companies of Australia such as the Aluminium Boats Australia, HIH Insurance and Stellar Homes will be discussed in order to figure out the primary misconducts that has been conducted and leads towards the insolvency of the report in this respect.

    Overview of the companies

    Aluminium Boats Australia

    The company Aluminium Boats Australia is a Brisbane based Shipbuilding Company which was collapsed into voluntary administration due to the loss incurred in the destruction of a navy boat in 2014. In this respect, the company was being regarded as one of the largest manufacturers in Australia and engaged with the manufacturing of commercial, luxury and defence vessels in this respect. The company had incurred a massive loss due to the accident of catching fire in the navy ship HMAS Bundaberg in August 2014. Due to the loss incurred in the accident, 160 employees of the organisation lost their jobs in this respect, and the creditors were updated in a prioritized manner after the in insolvency in accordance with the consultation with FTI (SmartCompany. 2019).

    HIH Insurance

    In case of the HIH Insurance, the company got approval from the NSW Supreme Court in 2001 regarding their liquidation in respect of the provisional liquidation of the company in this given respect. The company dealt with several aspects such as personal and domestic insurance, workers’ compensations insurance, small business, rural and commercial insurance, travel insurance, builders warranty insurance, corporate policies etc. Due to the failure in rapid expansion, unsupervised delegation of the company, presentation of false report, problems regarding the reserve funds, under pricing, recklessness in the management of the company, inefficient competency policies, fraudulence, greed and several other scandalous activities created the situation of insolvency of the company which affected several stakeholders of the company such as the shareholders and the sales agents of the company in this respect (Aph.gov.au. 2019).

    Stellar Homes

    South Australian Home building company Stellar Homes was collapsed in 2014 in terms of the voluntary administrative collapse in this respect due to the inefficiency in working with the stiff competition in the residential construction sector. The different climatic changes in the economy in South Australia for building industry had made it difficult for the industry to survive in the industry due to the result of fall in overall sales of the company. At the time of the liquidation of the company, almost 36 incomplete projects were remained in this respect and due to the cause of such insolvency, almost $5 million credits were left in the market for the company and the management of the credits went to the hands of the administrator to serve the purpose of paying up the rents in this respect (SmartCompany. 2019). 

    Reasons for liquidation

    Aluminium Boats Australia

    In case of Aluminium boats Australia, the major reason for the liquidation of the company was the accident happened in HMAS Bundaberg in August 2014 which caused a severe destruction in the economy of the company. Due to this reason, the financial health of the company was destroyed in this respect and there were a huge credit margin for the company which occurred due to this surprising accident in this regard. Such occurrence also affected the deal of the company with other parties such as the Queensland Police Service, Mooloolaba Coast guards and Cruise Whitsunday. In this respect, the company incurred a huge loss and this resulted to the voluntary administrative insolvency of the company (SmartCompany. 2019).

    HIH Insurance

    In respect of the HIH Insurance, there are several downfalls in the management which caused the insolvency of the company in this respect. First of all, the huge amount invested by the management in FAI insurance was very risky for the business of the company. Beside this, the inappropriate steps taken by the management for funding the film makers had caused a loss of over $100 million. Along with the factors, the natural calamity regarding the bank loans in Florida also caused a net loss for the company in this given respect. Along with this, certain changes in the accounting policies had also took place within the management of the company which resulted in a liquidation of the organisation. In the last place, the false projection of the liquidators recruited by the company also caused huge loss of $800 million in this respect in terms of rapid diversification of the company, which ultimately affected the accounting treatments and policies of the company in this given respect and the company was bound to follow the provisional liquidation in this respect.

    Stellar Homes

    For the liquidation of the Australian ship building company Stellar Homes, the ultimate cause was the changes in the economic climate at the particular region of the country. Due to this crisis, the cash flow for the company was hampered in this due respect and along with this; there was a severe downfall in the sales of the company in this given respect. Due to the downward tendencies among the consumers regarding the home building sector, the company could not keep up with the raising debt from its creditors which caused the administrative insolvency of the company in this respect.

    Ethics and governance

    APES 110 Code of Ethics for professional Accountants

    In APES 110, certain codes of ethics have been stated for the professional accountants in this respect in order to perform their duties with utmost responsibility and integrity in respect of handling the transactions of an entity. In this respect, there are five major principles which have been stated under this code in order to make it clear about the integrity of the accounting professional in order to implement proper ethics and avoid the insolvency of the company in this given respect (Apesb.org.au. 2019).

    ·         The first principle of ethics is regarding the integrity of the accountants in respect of maintaining the professional and business relationship in case of the business deal in this respect by maintaining the honesty and lucidity in the accounting procedure.

    ·         The second method deals with the objectivity which makes it sure that the accountant is not being engaged with any personal interest, conflict or be biased with a particular subject while engaging with their professional field.

    ·         In the third respect of this method, the professionals needs to consider the professional competence under which, it is required to maintain the knowledge and skill to a certain level for providing the professional services to the clients.

    ·         The confidentiality is another key component for maintaining the ethics in accounting procedure by an accountant in order to ensure that no information of the client will be disclosed unless the authority or right is being given to the professional.

    ·         In the last case, the professional must not breach any law and regulation due to the course of his or her actions in case of avoiding any discredits regarding the profession.

    Corporate governance

    In order to analyse and investigate the performance of a particular entity, the corporate governance is being taken into consideration in this given respect in order to implement the significant driving factors of the business in respect of the legislations stated by ASIC. In accordance with the guidelines of ASIC, certain evaluations can be made in this given respect of the report regarding the corporate governance in this given respect (Knowledge and review 2019).

    ·         The management should deal with the certain organisational conflicts in order to solve them for the better efficiency in work.

    ·         The involvement of the stakeholders is also necessary in this given respect in order to implement better efficiency in the management.

    ·         In the third segment of the report, the oversight in the financial aspect regarding the auditing procedure is necessary.

    ·         The management of the corporate information is also necessary in this respect of the organizational management (Chidiac El Hajj 2018).

    The pertaining of the executive remuneration is another key aspect of the corporate governance in respect of maintaining the lucidity of the management in this given respect.

    ·         The culture of the organisation is also required in this respect in terms of the workplace competencies.

    ·         The pertaining of the share capital is also necessary for the requirement made by ASIC.

    ·         The formation of the proper descriptions of the directors of the entity is also essential in this respect regarding the introductory guidance and the procedural outcome (Weisbord 2012).

    Role of the liabilities

    Due to the fact that the liabilities play a vital role in the insolvency of the organisations, it is very important to analyse the insolvency that is being inclined with the business of the organisation in this respect. In the given segment of the report, certain things which is inclined with the business of the organisation in this respect is needed to be discussed in this given respect (Olsen and Tamm 2017).

    Aluminium Boats Australia

    For the aspect of the accident took place in 2014 in HMAS Bundaberg, the company had lost a total amount of $4 million in this respect and this resulted to a permanent insolvency of the project in this given respect (SmartCompany. 2019).

    HIH Insurance

    In this case, a high leverage was being taken into consideration regarding the loans taken from the bank in this segment which is being calculated at a total of $100 million. Beside this, the FIA insurance cost of the company was being calculated as $300 million which was also a burden for the entity in order to run its business in this given respect (Aph.gov.au. 2019).

    Stellar Homes

    For the credit list of Stellar Homes, the amount calculated for the secured creditors in this respect was $3.4 million and the amount incurred from the unsecured creditors were being calculated as $1.5 million. As a total amount, the company had incurred a credit of $5 million before going towards the complete insolvency in this given respect (SmartCompany. 2019).

    Conclusions

    In the conclusive part of the report, it can be stated that there were certain misconducts which prevailed due to certain drawbacks made by the entity in this given respect. In case of Aluminium Boats Australia, the major drawback was the error in the manufacturing management which resulted the fire in the navy vessel.  On the other hand, in case of the HIH Insurance, the false statement made by the management, error in implementing the accounting policies and other strategies, unable to project the probable outcome of the financial activities taken by the management, under pricing of the products, several incompetence, fraudulence and greed resulted the insolvency of the company. In case of Stellar Homes, the changes in the economical climate in Australia caused the insolvency for the company in this given respect.

    By analysing the insolvency report of each of these organisations, the major outcome that comes through it is the error in decision making by the management. Apart from this, the implementation of improper work ethics and corporate governance is also other reasons for the liquidation of the organisations in this respect. 

    References

    SmartCompany. 2019. Construction Company Collapses Owing $5 Million - Smartcompany. [Online] Available at: [Accessed 5 January 2019].

    Aph.gov.au. 2019. HIH Insurance Group Collapse – Parliament of Australia. [Online] Available at:

    SmartCompany. 2019. Shipbuilder Collapses into Administration after Fire - Smartcompany. [Online] Available at: [Accessed 5 January 2019].

    Apesb.org.au. 2019. [Online] Available at:

    Knowledge, G. and review, C., 2019. Corporate Governance of Insolvent Companies to Be Strengthened As Part of Government Review. [Online] Company Rescue. Available at: [Accessed 5 January 2019].

    Chidiac El Hajj, M., 2018. A closer look at the corporate governance in Lebanon: A call for a bottom-up reform. Corporate Governance and Sustainability Review, 2(2), pp.48-61.

    Weisbord, R., 2012. Charitable Insolvency and Corporate Governance in Bankruptcy Reorganization. SSRN Electronic Journal,.

    Olsen, B.C. and Tamm, C., 2017. Corporate governance changes around bankruptcy. Managerial Finance43(10), pp.1152-1169.