CORPORATE GOVERNANCE IN PAYROLL AND FIXED ASSETS PROCESSES (STUDY OBJECTIVE 9)

Recall that Chapter 5 identified four primary functions of the corporate governance process: management oversight, internal controls and compliance, financial stewardship, and ethical conduct. While corporate governance is essential for all business processes, it is especially important in the areas of payroll and fixed assets, where historically there has been a large number of cases of fraud, theft, manipulation, and misuse of funds.

Without good corporate governance, time sheets may be more easily altered, payroll funds can be readily stolen, and fixed assets are more likely to be misused or stolen.

Payroll funds and fixed assets do not belong to the managers of the organization; rather, the managers are stewards, or temporary managers, of those assets. Corporate governance policies and procedures must be in place to ensure that expenditures occur only to benefit the organization and its owners, not to benefit the managers or employees personally. In addition, corporate governance policies should prevent a manager or employee from taking fixed assets for personal use.

THE REAL WORLD

Adelphia Business Solutions, Inc., provides an example of poor corporate governance leading to misuse of corporate funds earmarked for fixed asset purchases. In the late 1990s, Adelphia was the sixth largest cable television company in the United States. The corporation was majority-owned and managed by members of the ...

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