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Business Risk of HIH Insurance Limited

1.How would you assess the business risk of HIH Insurance Limited? List several inherent risk factors effecting HIH.

2.Discuss the facts and findings of relevant court cases that Andersens should refer to in determining the likelihood of the Partnership being held liable to and What Conditions need to exist for a Negligence action to be upheld? 

3.Why would HIH have wanted to hire prior members of its External Audit team? 

The imperfect record of the financial report is responsible for the breakdown of the company which can be a threat to the business. The non-accurate accounting report can be a major reason for the failure of the business deals. When the company becomes able to submit the proper finance report, then that will define the improvement of the business, and the development of the annual finance report can descry the decreasing material quality which can be the cause of the business risk of HIH insurance limited. According to the auditor's lack of professionals can be a cause of the business risk. The infrastructure and the policies which are responsible for the poor and unreasonable decision can be a reason of great loss and the collapse of the HIH Insurance Company that can push the business to a pick of risk. Through the explanation of the factors, it is clear that this matter is responsible for the business risks. If the development of the money power can be demonstrated correctly, then it can be noticed that the implement of the credit is highly responsible for the business failure and the sales of the assets also a reason of the business risks (Bragg, 2013). The presence of unprofessional and inefficient staffs can be a reason of great loss for the business. Often the staffs were unable to find proper clients for investment or sometimes they engulfed all the money and did not submit the amount of money to the company which is truly harmful to any company.  When the premium is collected from the clients by companies for a long time, then it required a number of efficient workers which produce the shortage of money for the company the can be a reason of the business risks. When the company faced various kinds of risks, then the collapse situation arrived.

Inherent Risk factors affecting HIH at financial report level

Due to the lack of proper ethical guidelines and the absence of appropriate insurance policies, the increasing budgets become fall which can be a major risk factor that is affecting the HIH at finance report level. The risks occurring in the annual finance report level is one of the factors influencing the growth of the HIH Insurance and caused business risks. To identify the investment tolerance, it is necessary to clearly describe the implementation of the factors affecting the business risks. The proper protocol of the work and the individual investment shows a stability of the accounting theory of the business. The removal of the risk factors of the HIH Insurance Company it is necessary to separate the person based licensed investment which can be critical for the growth of the business finance report (Britton and Waterston, 2013). The replacement of the assets or the sale of the properties can be a factor affecting HIH Insurance annual report level. Many legal issues between the creditors and the clients can also be changing factor oh the business risks. The company needs to recruit dedicated employees because most of the times the lack of efficient and well-experienced members can also be a significant problem for the company which affecting the annual financial report level (Christensen, Cottrell and Budd, 2016). If suddenly any client denies continuing giving their premium then that will be very much affecting the development of the enterprise. The HIH Insurance annual report level is also influenced or affected by this factor.

Inherent Risk factors affecting HIH at financial report level

Insufficient responses to the high pressure and management rising inadequately in the international insurance market were the primary cause of the danger of the company that is the HIH insurance. The interest of many stakeholders that affected the misguiding or false statements was in print. The financial report of the perspective company depicted significant money owing leverage and cover liabilities, the money owing means solution risk of the particular company (Weil, 2017). Now the matter is why this so much irresponsible in such a manner, the directors of act boards are the main responsible for these unjust representations of the financial statements of the company. Only they are not the responsible accountants and auditors are the same responsibility for these false tasks of the monetary declarations of the enterprise (Dauber, 2005). Responsible for this breakdown of these management companies was presented as an evil financial system, the people or group was the same responsibility of this initial failure of the company. The clients were facing an enormous problems or losses for this inadequate responsibility. The company was paid responsible accountable to customers for losing their inadequate amount of money.  Not only that if clients think that they can take measures responsibility for the board of directors of the management and cover their insufficient loss of amount. The management's liability to the credit pay was due to the creditors lend money to the company. The company is answerable or pays the due amounts to the suppliers and other creditors.

Negligence action

Defendant owes the applicant on the duty of care then the negligence or careless occurs, when the defeated breaches the duty of attention when the candidate suffers an injury or damage when it occurs when the damage or injury causation by the outcome of the violation of the duty of care. In a state of affairs where a specific person owes another obligation of care, causes several damages, injury, loss to each and the particular person. The action of negligence conducted by the accountants or some auditors was responsible for the collapse of the HIH insurance company as per reports. Determination by the court signifies that the breach of the duty of care by reviewing the standard of care, to avoid some causing injuries or harm is the duty of attention is the legal compulsion (Hill, 2012). The boards of directors were the main responsibility for the failure of the company, and it can be stated as breaching the trust duty of care. Therefore, the regulatory framework is not appropriately followed by the organization HIH due to which company had to make this harsh situation. According to the law, which regulates the business system all across Australia, it is instated that this kind of act is considered as a breach in the regime of an organization and is capable of punishment (Waterston, 2006). The company is liable to answer all its customers for the negligence in their behavioral aspect and this maybe another reason for the loss of trust in this organization of the people.

Facts and findings relevant to the court case

Legislative system of the company needed to exhume for the augmentation of the business system. That is why The HIH wants to re-hire its former members of the external audit team. The abnormal development of the organization can be justified by its time of failure. The organization faced the situation due to the enhancement of work since the structuring of a project and reforms are illogically enhanced. It is very clear from this event that the company The HIH did not abide by the regulatory framework approved by the government of Australia and for this reason the organization had to take such harsh a decision (Horngren, 2013). Quite naturally, due to such disorientations in the construction of work, the auditor has blamed for unsuitable performances regarding his duties towards the company altogether. In such a condition, where the regulatory of the government was being challenged, the company was bound to be in the worst of situations (Shim, Siegel and Shim, 2012). It was only because of this, that the company needs to hire its ex-employees from the audit team to make a better performance out of them, and proper construction of work can be depicted which shows the enhancement of the works done together by the company so far.

Advantages

In this particular matter, the primary thing that had occurred due to the alteration of the auditing team in the HIH organization is an actual detailed depiction of the amount of work done so far had been reported. The amount of work done and the exact amount of work features can be easily illustrated due to the alteration of the entire auditing team and revamp it with a new team comprising of the ex-employees (Schroeder, Clark and Cathey, 2011). Thus, this new plan of action helps in the improvement of performance and allows proper planning of the research for the further benefit of the company. This had led to the development of profits of the organization in a massive way (Horngren, 2014). Also, the gap that had occurred in the balance of the company was dissolving, and the company was emerging more like a stable structure in the work ethics. The equilibrium that was necessary to maintain as an organization was once again in the process of restoration due to this strategy. Previously, the old auditors had breached many of the laws in presenting the financial accounts to the legislative authorities as they have presented many faulty records that had shown incorrect profit and loss, income, expenditure and balance in the finance system of the company (Horngren, 2013). However, the introduction of the new team of auditors who were previously appointed had a fresh start and new and legalized outlook in the business strategy and financial accounting department.

Negligence action

Circumstances representing ethical standards violation

The government of Australia has some standard laws regarding the practical ethics of an organization. It was reported by case studies that the HIH Company had desecrated these ethical standards (Schroeder, Clark and Cathey, 2011). The Board of Directors along with the auditors had been found guilty of producing unfair financial statements. According to the government of Australia, business ethics deals with the fair and inequitable means in an organization and any illegal or discriminatory conduct regarding the financial accounting of an organization is punishable as it is a vital aspect of an organization (Jones, 2013). It is considered that any illicit means adopted to represent a faulty financial accounting is the open gate in unlawful inflow or outflow of cash, illegal representation of income, expenditure, profit and loss, assets and liabilities. The guidelines regarding running a business organization are strict and breaching any one of them is liable to be punished for an offense. This behavior only represented a lack of integrity and negligence in carrying out the respective duties of the Board of Directors as well as the auditors. This only led to the downfall of the HIH Company. Since the rules and regulations are only meant for the well-being of the company (Libby, Libby and Short, 2012). Hence, it was very clear that the proper image of the company was tarnished and this affected the interest of many people in the organization. 

Outlining Primary recommendations

CLERP 9 and Ramsay Report provide government approved guidelines on the proper preparation of a company’s financial statements and corporate ascendancy. The CLERP 9 is responsible for providing the information on the appropriate standards in the liabilities that occurs due to breaches in the system, the independence of an auditor, compliance controls, and the accounting standards (Oppermann, 2009). The auditors are to bridge the gap between the perspective and expectation of a user on the financial statement of an organization because an accountant prepares the financial declarations of the company and gives it a real standardization. Legislation will always provide clear concepts of representing the account practices of a company, and in no ways, these can be breached. As per the government authorized rules, both the internal and external auditors are equally responsible for maintaining the proper financial statements and the correct valuation of the company, but if these line of action is breached in any way, then they are to be blamed for failing in eliminating the misstatements found within the financial accounting (Powers and Needles, 2012).

References

Bragg, S. (2013). Accounting best practices, seventh edition. Hoboken, N.J.: John Wiley & Sons.

Britton, A. and Waterston, C. (2013). Financial accounting. Harlow: Financial Times Prentice Hall.

Christensen, T., Cottrell, D. and Budd, C. (2016). Advanced financial accounting. New York, NY: McGraw-Hill Education.

Dauber, N. (2005). Generally accepted auditing standards. Mason, OH: Texere.

Hill, J. (2012). Colloidal Silver Medical Uses, Toxicology & Manufacture.

Horngren, C. (2013). Accounting. Frenchs Forest, N.S.W.: Pearson Australia.

Horngren, C. (2013). Financial accounting. Frenchs Forest, N.S.W.: Pearson Australia Group.

Horngren, C. (2014). Accounting. Toronto: Pearson Canada.

Jones, M. (2013). Accounting. Chichester: Wiley.

Libby, R., Libby, P. and Short, D. (2012). Financial accounting.

Oppermann, H. (2009). Accounting standards. Lansdowne: Juta.

Powers, M. and Needles, B. (2012). Financial accounting. [Mason]: South-Western, Cengage Learning.

Schroeder, R., Clark, M. and Cathey, J. (2011). Financial accounting theory and analysis. Hoboken, NJ: Wiley.

Schroeder, R., Clark, M. and Cathey, J. (2011). Financial accounting theory and analysis. Hoboken, NJ: Wiley.

Shim, J., Siegel, J. and Shim, J. (2012). Financial accounting. New York: McGraw-Hill.

Waterston, C. (2006). Financial Accounting. Pearson Education UK.

Weil, R. (2017). Financial accounting. [Place of publication not identified]: Cengage Learning.

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