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Technology & Innovation Management Technology & Innovation Managemen
International
Executive Master of Auditing
AUDITING
COURSE MANUAL
Cohort 2014
IEMA2014
All rights reserved. No part of this publication may be reproduced or utilized in any
form or by any means, electronic or mechanical, including photocopying, recording
or by any information storage or retrieval system, without prior written permission
from the copyright owner, or, as the cases may be, the publishers, beyond the
exceptions provided by the Copyright Law.
2
Technology & Innovation Management Technology & Innovation Managemen
1. Introduction
In today’s information economy, characterized by a rapidly expanding amount of
information available to decision makers, high-quality information has become even more
important to make informed decisions. Hence, there is a need or demand for independent
professionals providing assurance on key financial and non-financial information. Auditing
and assurance services fulfil this role by ensuring the reliability, credibility and relevance
of business information. The high-profile corporate failures in the years 2000 and the
more recent financial crisis made once more clear how critical the role of reliable
information is.
The audit of financial statements is one type of assurance service where the objective is
to provide an opinion about the fairness of the reported financial position and results
based on GAAP, like IFRS or US GAAP, which are used as benchmark criteria. The audit
process consists of a number of audit phases and is greatly dependent on the nature of
the entity’s business. A good understanding of the client’s business model is therefore of
utmost importance for the auditor. The end product of the audit is the audit report, in
which the auditor’s findings are communicated to the users of the financial statements.
While the focus of this course is on financial statement auditing, attention will also be
given to other types of auditing and assurance services, which should be distinguished
from non-assurance services. The IAASB (International Auditing and Assurance
Standards Board) defines an assurance engagement as: “an engagement in which a
practitioner expresses a conclusion designed to enhance the degree of confidence of the
intended users other than the responsible party about the outcome of the evaluation or
measurement of a subject matter against criteria”. The subject matter of assurance
services can take many forms, like for example assurance on the effectiveness of internal
control, performance on human rights, or sustainability performance.
2. Goals of the Course
The objectives of this course are twofold. First, students should obtain a solid knowledge
of the literature on auditing. To that end, both a textbook and academic articles on the
subject of the course will be covered. The literature of this course emphasizes three
aspects of auditing: (1) Conducting an audit is a judgmental process, i.e. auditing is not
“just applying the standard procedures”; (2) Conducting an audit requires a good
understanding of clients, especially their strategy and risks and the client’s internal
control has a strong influence on the audit and (3) conducting an audit is focused in the
public interest, applying appropriate ethics and values, using adequate level of
professional scepticism.
The second objective of this course is that students should obtain skills that are
important in an auditing environment. To train students’ practical skills, cases on various
auditing aspects will be discussed. More specifically, the purposes of these cases are to
further develop students’: (1) problem solving skills in auditing settings; (2) experience
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Technology & Innovation Management Technology & Innovation Managemen
in using and interpreting data in decision contexts in which they are commonly used; and
(3) report-writing and oral presentation skills.
3. Topical coverage
This course will introduce the basic audit process, provide an overview of all aspects of a
typical audit, and include international auditing standards, independence rules and
auditing and Statistical auditing will be incorporated.
Topic Detail
1. The Auditing Environment History, Institutional Framework and Structure; General
Control Framework; Independence & Ethics; Corporate
Governance; Professional Regulations; Public Oversight;
Audit Market; Relevance & Reliability; Historical
Financial Data and other financial and non-financial
data.
2. Economics of Auditing An overview of demand for assurance based on agency
theory, moral hazard, signaling and risk management
with various stakeholder views.
3. Findamental Concepts of
Auditing
Ethics and values, public interest, code of ethics,
independence, principle based regulation, professional
scepticism.
Nature of Evidence, Risk and Materiality; Audit Risk
Model; Evidential Reasoning; Basic Audit Planning;
Evidence and Audit Procedures
4. The Audit Process Client Acceptance; Understanding a Client’s Business;
Assessing Risk; Audit Risks; First time audit; Internal
Control and Auditing; Control Planning; Auditing Specific
Accounts; Events after Balance Sheet Date; Going
Concern; Use of the Work of Other Auditor or Internal
Auditor; Use of Specialists; Information for Comparison/
Compilation Assignments.
Quality control and quality assurance within audit
organizations.
5. Risk Evaluation and Audit
Planning
Strategic and Process Risk Evaluation; Risk Maps;
Implications of Business Risks; Applications of Risk
Assessment
6. Completing the Audit Wrap-up Procedures; Auditor Communication (audit
report, management letter, other report)s; Types of
Audit Reports; Communication of Audit Results
7. Applied Audit Planning Sales and Collection Cycle; Acquisition and Payment
Cycle; Inventory and Warehouse Cycle; Payroll and
Personnel cycle; Capital Acquisition and repayment
Cycle; Cash Balance Cycle.
8. Statistical Evidence in
Auditing
Sampling; Analytical Procedures; Projecting Errors to a
Population of Transactions.
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Technology & Innovation Management Technology & Innovation Managemen
9. Computer-assisted Audit
Testing and IT
IT Control: Introduction and Trends; Positioning of EDP
in the field of Auditing; Assurance Function of the EDP-
auditor; Cooperation of Auditor and IT auditor; IT-
values and Controls; General Controls; Application
Controls; ICT impact and alignment; CAATS & IT
Governance; XBRL and the Consequences for the
Auditor/ EDP-auditor; Use of File Analysis; Actual
Developments on the Area of Assurance Providing.
10. Organizations and the
Audit
Typology of Organizations and Audit; Governmental
Audit; Audit of Non Profit Organizations; Audit of
Financial Institutions; Audit of SME’s.
11. Assurance Services Fundamentals of Assurance Services; Subject Matter;
General Assurance Standards; Levels of Assurance;
Applications.
12. Forensic Auditing Fraud and Misappropriation of Assets; Requirements for
Basic Audit; Extended Fraud Procedures; Reporting
Responsibilities; Legal Implications and Process.
4. Examination of the Course
The Auditing exam consists of a written examination and an oral examination. The
written examination consists of a university exam (one exam of three hours) and a
national exam (three exams of three hours each). The oral examination is an oral exam
of one hour.
Students receive separate grades for the written and oral examination. A scale from 1-10
is applicable.
In order to pass the written examination you have to pass:
- The university exam with a minimum grade of 6,0
- The national exam, consists of 3 exams. In order to pass the national exam there
need to be obtained at least 17 points out of 30 points. At least 2 exams need to
be passed with a minimum grade of 6 points and the lowest grade should be at
least a minimum grade of 5 points.
If these rules deviate from the requirements from the “Landelijke redactiecommissie
Financial Auditing” or from “Commissie Eindtermen Accountantsopleiding (CEA)” their
requirements are valid.
In order to pass the oral exam a minimum grade of 6 points is required. Admission to the
oral exam is allowed after passing the Auditing university exam and after having
submitted the national auditing exam (not necessarily passed).
The written exams take place in May 2016 (university exam) and in July 2016 (national
exam). The oral exam takes place in Fall 2016.
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Technology & Innovation Management Technology & Innovation Managemen
See the Education and Examination Regulations 2014-2015 for more detailed information
on the examination and examination rules.
4. Literature
The following book will be used:
Auditing & Assurance Services, Third International Edition, McGraw-Hill, 2014
Eilifsen, A., Messier, W., Glover, S., and D. Prawitt. (ISBN-13 9780077143015)
Further readings (e.g., academic articles) will be provided during the course.
5. Lecturers
The course is coordinated by prof. dr. Peter Eimers, prof. dr. W.Robert Knechel and
prof.dr. Ann Vanstraelen.
Lecturers include:
- Prof. dr. Roger Dassen RA
- Prof. dr. Peter Eimers RA
- Paul Hurks RA
- Prof.dr. W. Robert Knechel
- Guy Parmentier Bedrijfsrevisor
- Prof. dr. Robin W. Roberts CPA
- Prof. dr. Ann Vanstraelen
- Prof. dr. Philip Wallage RA
6. Homework/ long distance learning
In between the seminars, students need to prepare and hand in homework cases as part
of the exam preparation.
Students need to hand in at least 75% of all cases (graded “sufficient”) in time in order
to be admitted to the exams.
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Technology & Innovation Management Technology & Innovation Managemen
7. Course overview
Session Theme Lecturer
Literature
October
2014
Fundamentals of auditing
and assurance
The auditing and assurance
environment
W. Robert Knechel
Philip Wallage
Textbook chapters 1,
3, 4, 5
Textbook chapters 2,
19, 20
December
2014
Fundamentals of auditing:
continued
Revenue and customer
service management
W. Robert Knechel
Robin W. Roberts
Textbook chapters 4,
6, 7
Textbook chapter 10
May 2015
Supply chain management
Property and asset
management
Insights from academic
research on auditing
Philip Wallage
Philip Wallage
Ann Vanstraelen
Textbook chapters
11-13
Textbook chapter 14
Academic articles
October
2015
Knowledge management
Human resources
management
Financial and investment
management
Sampling
Fraud
Peter Eimers/Paul Hurks
Peter Eimers/Paul Hurks
Peter Eimers/Paul Hurks
Peter Eimers/Paul Hurks
Guy Parmentier
Textbook chapter 14
Textbook chapter 12
Textbook chapters
15-16
Textbook chapters 8-9
Textbook chapter 3
December
2015
Country-specific auditing
module
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Technology & Innovation Management Technology & Innovation Managemen
May 2016
Financial report preparation
Advanced auditing topics
Insights from academic
research
Peter Eimers/Paul Hurks
Peter Eimers/Paul Hurks
Ann Vanstraelen
Chapters 17-18
Chapter 11
Academic articles
Technology & Innovation Management Technology & Innovation Managemen
International
Executive Master of Auditing
Corporate Governance
COURSE MANUAL
Cohort 2014
IEMA2014
All rights reserved. No part of this publication may be reproduced or utilized in any form or
by any means, electronic or mechanical, including photocopying, recording or by any
information storage or retrieval system, without prior written permission from the copyright owner, or, as the cases may be, the publishers, beyond the exceptions provided by the Copyright Law.
2
Technology & Innovation Management Technology & Innovation Managemen
1. Introduction
Corporate Governance is the process and structure used to direct and manage the business and
affairs of the corporations with the objective of enhancing shareholder value, which includes
ensuring the financial viability of the business
In this course we focus on the (internal) auditor’s view on Corporate Governance in understanding
major causes of scandals. We will apply Enterprise Risk Management and major elements of
Internal Control of Financial Reporting which are major focus area’s for an auditor to
prevent/discover possible governance issues. We also focus on (un)ethical behavior in a corporate
environment.
2. Goals of the Course
The objectives of this course are twofold. First, students should obtain a solid knowledge of the
academic literature on Corporate governance. To that end, two textbooks will be covered. The
second objective of this course is for students to obtain skills that are important in designing, using
and evaluating the Corporate Governance of an organization. To train student’s skills, cases on
various aspects will be discussed.
This course aims to provide students with an understanding of:
The importance, meaning and inter-relations between Corporate Governance, Internal
Control and Risk Management;
An understanding of the roles and responsibilities of the various stakeholders in a private
or public organization; Role of the (internal)auditor and audit committee.
The content of the vital Corporate Governance codes and the substantial similarities and
differences between various codes;
The way in which risk management can be embedded into the internal control structure of
the organization ;
The importance of proper information systems in the implementation of an internal control
system;
An understanding of the limitations of Corporate Governance codes with respect to
ensuring “proper” management. Sustainability reporting.
3. Lectures and material
Lectures:
The theory will be covered during the lectures. Students are encouraged to ask questions and
participate actively to discuss the topic at hand. There will be 16-20 hours of lectures. Several
cases will be discussed. The lectures will be given by prof. dr. Oscar van Leeuwen.
Students need to prepare the literature and case as requested on the schedule It’s very important
to prepare the cases to improve the quality of interaction in the course. Articles and cases will be
uploaded on blackboard. Besides this you need two books (see below). We use the edition of the
book as presented in the course. You can’t use older editions because the corporate governance
codes changes on a regular basis.
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Technology & Innovation Management Technology & Innovation Managemen
Material:
The books to be studied are:
- Corporate Governance, Internal Control and Risk Management, 2nd edition,
by R.J. Streng ISBN 978-9-081545815
(please find a PDF from this book on Blackboard!)
- Corporate governance, Principles and Issues, by D. Nordberg, 2011
ISBN 978-1-847873330
The overall set-up of the program can be depicted as follows:
3. Internal Control over Financial Reporting
1. Introduction and definitions
The Key role of Information Systems
Directors, Shareholders and Auditors: Roles and
Responsibilities
2. Business Ethics and Corporate Governance
4. Enterprise Risk management
Sarban
es-Oxley
The D
utch
CG
Co
de 2
00
9
The U
K C
G C
od
e
Oth
er Co
des
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Technology & Innovation Management Technology & Innovation Managemen
Course overview:
Date Day
Part 1 Introduction Corporate Governance
Foundations of Corporate Governance
Codes (UK, Sox, Dutch, other )
Part 2 Business Ethics and Corporate Governance
Part 3 Internal Control & Financial Reporting,
Enterprise Risk management
Part 4 Principles of Corporate Governance according to
Nordberg
May 2015 Examination- exam of 3 hours
In between the seminars, students need to prepare and hand in homework cases as part of the exam preparation. Students need to hand in at least 75% of all cases (graded “sufficient”) in time in order to be admitted to the examination.
4. Examination
The examination will be a closed book examination.
1
International
Executive Master of Auditing
COMPANY LAW
COURSE MANUAL
Cohort 2014
IEMA2015
All rights reserved. No part of this publication may be reproduced or utilized in any
form or by any means, electronic or mechanical, including photocopying, recording or
by any information storage or retrieval system, without prior written permission from
the copyright owner, or, as the cases may be, the publishers, beyond the exceptions
provided by the Copyright Law.
2
INTRODUCTION
This course is dedicated to company law from a Dutch perspective. During the course various
aspects of company law will be discussed and where possible placed within a European context.
The focus is on the way in which commercial organizations can be legally structured. We will
start with the different types of business organizations and the division of power and liabilities
within these organizations. From there on we will move to the functioning of private and public
limited liability companies. Issues such as minimum capital requirements, incorporation, the
division of power within the company`s internal structure and company take overs will be
discussed.
Next to company law, parts of the course will furthermore be dedicated to principles Dutch
property and insolvency law.
GOAL AND AIM OF THE COURSE
Through this course participants will acquire in-depth knowledge of Dutch company law and the
relevant Dutch as well as European legal structure in which companies have to operate. Through
the interactive sessions the participants will gain insights into the various types of business
structures and the way in which these business structures can be legally structured and
incorporated. The internal organization, representation, duties, powers and liabilities of those
involved in the business structure as well as the position of employees will be discussed.
The goal is to create awareness of legal considerations that must be taken into account in most
business organizations. Through a didactical approach based on cases and current issues
participants will become acquainted with the functioning and role of company law in relation to
the incorporation, internal division of power and the responsibilities of a company’s main
decision makers.
Additionally, participant will gain knowledge of the basic principles of Dutch insolvency and
property law.
TEACHING METHOD
The teaching method is based on interactive sessions consisting partly of lectures and partly of in
class discussions and solving case studies. Part of the teaching material to be used during the
sessions is incorporated in this manual (see below) other parts will be distributed during class.
3
EXAMINATION OF THE COURSE
The examination will consist of an exam paper. The exam will be graded on a scale from 0-10.
The requirements regarding the amount of words and topic will be communicated at a later stage.
LITERATURE
The following relevant literature can be used as reference material for this course:
- M. Muller (ed.), Corporate Law in The Netherlands, Kluwer Law International 2013.
For those who are able to read in Dutch, the following books can be used to prepare for the
course:
- J.J.A. Hamers en L.P.W. Van Vliet, Inleiding personenvennootschappen, Boom
Juridische Uitgevers 2012
- P. Van Schilfgaarde, J. Winter en J.B. Wezenman, Van de NV en de BV, Kluwer 2013.
COURSE OVERVIEW
Part I The framework: Business vehicles and the EU background of company
law.
Recommended reading: M. Muller (ed.), Corporate Law in The
Netherlands, Kluwer Law International 2013, Chapter 1.
Part II Partnerships in the Netherlands
Recommended reading: M. Muller (ed.), Corporate Law in The
Netherlands, Kluwer Law International 2013, Chapter 2.
Part III The Dutch public and private limited liability company
Recommended reading: M. Muller (ed.), Corporate Law in The
Netherlands, Kluwer Law International 2013, Chapter 3, 4 and 5.
4
Part IV Internal structure, liability and corporate governance
Recommended reading:
- M. Muller (ed.), Corporate Law in The Netherlands, Kluwer Law
International 2013, Chapter 6, 7, 8, 9, 10 and 13.
- A. Verdam, The obligation of Dutch Company Directors to be guided by
the interests of the company compared to the concept of “Enlightened
Shareholder Value” in the English Companies Act, European Company
Law 11, no 3, p. 157-164 (2014).
- R. Abma and M. Olaerts, 'Is the Comply or Explain Principle a Suitable
Mechanism for Corporate Governance throughout the EU?: The Dutch
Experience', European Company Law 2012, Issue 6, pp. 286–299. This
article is freely accessible via the library catalogue, E-journals.
- M. De Jongh, Shareholders’ Duties to the Company and Fellow
Shareholders, European Company Law 2012, vol. 9, no. 3, p. 185-191.
Part V Mergers and acquisitions and company groups
Recommended reading:
- M. Muller (ed.), Corporate Law in The Netherlands, Kluwer Law
International 2013, Chapter 11.
- D. Quinn, Dutch treat: Netherlands judiciary only goes halfway towards
adopting Delaware trilogy in takeover context, Vanderbilt Journal of
Translational Law 2008, vol. 41 (Not in the reader, freely available on
Vanderbilt Journal of Translational Law website:
http://www.vanderbilt.edu/jotl/manage/wp-
content/uploads/Quinn_final_7.pdf)
- S.M. Bartman, ‘From Autonomy of Interests to Concurrence of Interests
in Dutch Group Company Law’, ECL 2007, volume 4, issue 5.
5
MATERIAL TO BE USED DURING THE SESSIONS
PART II
Case Study
You are a talented engineer and have come up with an innovative technique allowing you to
integrate solar panels into even the smallest devices. You are convinced that this system can
become a hype for the future and you want to develop it further. However, you cannot do this on
your own. First of all, there is your old classmate Peter (who was born in London). You
developed the technique of the solar panels together with him during your years at the University
of Wageningen and the two of you are complementary. You really need his knowledge and skills
to make this business into a success. Secondly, there is the small issue of raising a sufficient
amount of funds. Since you and Peter have just graduated, neither of you has anything to invest
besides brainpower. You talked to your father last week and he is willing to help you out in the
start up phase by investing in the business. This investment may not be enough for the future
once you start selling your products worldwide but it should be enough to get you started.
However, your father is a very dominant man. He has old school ideas about upbringing which he
most probably will also transpose to the running of ‘your business’. He is willing to invest
however, this investment comes with certain conditions. First of all, your father wants to treat his
children equally and he has always dreamed of setting up a family business. Your sister
graduated from the faculty of law three years ago but she still does not have a job. Your father
will only invest if you take her on board as well, not just as a employee but giving her a formal
position so that she can be involved in the business in the long run. You and your sister have had
your differences in the past. However, after the difficult years of puberty these problems seem to
belong to the past and you see some value in taking her on board. After all, she may have some
valuable legal knowledge to help you set up the business. The fact that she graduated in the area
of criminal law does not really help but you are willing to make the most of it. A bigger challenge
is however your brother Ben. Ben is the youngest of the siblings. He took on various studies but
never finished either of them. He mainly enjoyed student life. He is passionate about expensive
sports cars, has a big mouth and is not very responsible with money. Nevertheless, he is a very
social and likable guy and may be an asset in the sales department.
6
PART III
Case study: Pre- incorporation
Edgar Johnston is one of the many victims of the financial crisis and is fired as fashion designer
of Belperry PLC. Although jobless, many former business relations contact Edgar Johnston for
various design assignments. Since business is going great he is thinking of setting up a limited
company under the name “Johnstons Design Ltd”. As of February 2011 Edgar Johnston is
contracting with his business partners on behalf of “Johnstons Design Ltd” yet to be formed.
Edgar Johnston finally finds a spare moment to incorporate his company and on May 15th of the
same year “Johnstons Design Ltd” is registered. Edgar Johnston has full control over his
company and owns 100% of the shares. His girlfriend Anita Rowell becomes sole director of the
company.
One of the suppliers of “Johnstons Design Ltd”, “Buttons and Zippers ltd” has contracted with
“Johnstons Design Ltd” since February 2011. The supplier is still unpaid. “Buttons and Zippers
ltd” asks your advice who he can sue.
7
PART IV
Please note that the two case studies below are a follow up of the case study for part I mentioned
above
Case Study I
You have opted for a public limited liability company. You, Peter, your sister and Ben are all
appointed as directors of the company. However, your sisters’ business talent seems to be
restricted. She is better at law than at making business decisions and turned out not to be the
brightest of entrepreneurs. Therefore, you decide to take precautionary measures by limiting her
power to represent the company. Ben on the other hand needs to be able to conclude contracts in
name and on behalf of the company since he is in charge of the marketing. However, you fear his
car extravaganza may get the better of him and that after a commercial success he may step into
the office of the local car dealer to buy that May Bach he has been dreaming of for years on the
company`s account. In order to prevent this, you curtail his power to represent the company to
contracts not exceeding the value of 5000 euro.
Case Study II
You have eventually decided to incorporate a limited liability company. You and Peter form the
board of directors while your brother and sister are shareholders of the company. You and Peter
of course also own an equal amount of shares. The company has made profits over the past four
years. The majority of the profit has been reinvested and has been used to gradually increase
directors’ salaries. However, Ben is getting anxious. He has his eye on a new car and has already
mentioned on various occasions that in his opinion the time is right to start paying dividends. The
proposal to pay dividend is put on the agenda for the next general meeting.
8
PART V
Voting 'No' on Shareholder Democracy By Michael Kinsley
Google, the Internet search engine company, went public on Thursday, and shares issued at $85
were soon trading at over $100. No one is forced to buy Google shares. People do it voluntarily,
even downright eagerly.
This is so even though what they are buying are so-called Class A shares, which might
more accurately be labelled second-class shares. First-class shares, mischievously called Class B,
are held by the company's two founders and other high executives. In terms of dividends and so
on, the two classes are identical. But Class B shares get 10 votes each, while Class A shares get
only one. This means in effect that the company can raise money, and the founders can get
fabulously rich, by selling stock to the public, but even with a tiny minority of the shares, the
founders will control the company. And the public shareholders can't do anything about it.
Google thus thumbs its nose at one of the major pieties of our day: shareholder
democracy. This has been the high-minded response to Enron and the other corporate-looting
scandals: Shareholders should have more say -- or, more precisely, some say, since now they
basically have none -- about the management of their companies. That way, management couldn't
so easily overpay itself or loot the company in more dramatic ways. The Securities and Exchange
Commission is considering rules to make it easier for large institutional investors, at least, to
challenge management nominees for boards of directors.
It's democracy. Who could be against it? Yet just this week, despite Enron, WorldCom
and all, investors kicked and clawed to put money into a company that, in democratic terms,
might as well be the old Soviet Union. Apparently they don't care. They want to be serfs. Are
they nuts? Financial masochists?
Well, they think they're going to get rich, don't they? And, like the citizens of Singapore,
they would rather be rich than free, at least in this narrow context. They cling to this view despite
studies waved around by shareholder democracy enthusiasts showing that companies with some
fundamental democratic reforms do better than companies without. More important, and unlike
the old Soviet Union, Google will let you leave anytime you want. You just sell your stock.
In their prospectus, Google's founders have some malarkey about how they are doing this
dual-class business to prevent the company from being overly concerned with short-term profits
and enable it to take the longer, ultimately more profitable, view. In other words, they think they
know the shareholders' interests better than the shareholders themselves do. Shareholder
democracy buffs are saying the same thing when they try to pressure, or even require, companies
to make democratic reforms. But unlike Google, you can't free yourself of the SEC by simply
calling your broker.
Another company with dual classes of stock is Berkshire Hathaway Inc., run by the
legendary Warren Buffett. The last thing in the world that even second-class shareholders of
Berkshire want is shareholder democracy. They're buying into Buffett's benign dictatorship, not
into pro-rata shares of the wisdom of any idiot who buys in too. They're delighted to have no say
in the company, as long as they are assured that other shareholders have no say either. That is far
from nuts.
9
Or what about newspaper companies such as The Washington Post, the New York Times
and Dow Jones, which publishes the Wall Street Journal? They have dual classes of stock and are
blunt about the purpose: It is to retain family control. They say that this is to make sure that the
newspaper survives and maintains the highest journalistic standards, even if this means giving up
those last few drops of potential profit. You can believe them, or you can believe it's all about
dynastic vanity. But these companies are being honest that they have goals other than maximizing
profits, and the price of their shares will reflect the extent to which others wish to share in this
enterprise. Why stop them, or even sneer at them?
Democracy is actually a second-best solution. If we're all going to McDonald's, and we all
have to get the same thing, it should be decided by majority vote. But it's even better if we each
can get what we want. And you can be fairly confident that a majority of McDonald's customers
prefer hamburgers, while a majority at Popeye's prefer chicken. You don't have to require a vote.
Advocates of shareholder democracy believe it will lead to companies that care more for
the environment, treat their workers better and so on. Well maybe, maybe not. In a world of
perfect corporate democracy, in which large public companies are required to pursue only those
goals that can be agreed upon by the owners of a majority of the publicly traded shares at any
moment, the most likely result would be companies focused exclusively on maximizing profits.
Requiring shareholder democracy actually stifles it. Why shouldn't shareholder democracy
include the right to decide whether you want shares in a company that practices shareholder
democracy?
Source: Washingtonpost.com, Sunday, August 22, 2004; Page B07
How Capitalist is America?
By: professor Marc Roe
Source: http://www.project-syndicate.org/commentary/how-capitalist-is-america
CAMBRIDGE – If capitalism’s border is with socialism, we know why the world properly sees
the United States as strongly capitalist. State ownership is low, and is viewed as aberrational
when it occurs (such as the government takeovers of General Motors and Chrysler in recent years,
from which officials are rushing to exit). The government intervenes in the economy less than in
most advanced nations, and major social programs like universal health care are not as deeply
embedded in the US as elsewhere.
But these are not the only dimensions to consider in judging how capitalist the US really is.
Consider the extent to which capital – that is, shareholders – rules in large businesses: if a
conflict arises between capital’s goals and those of managers, who wins?
Looked at in this way, America’s capitalism becomes more ambiguous. American law gives more
authority to managers and corporate directors than to shareholders. If shareholders want to tell
directors what to do – say, borrow more money and expand the business, or close off the money-
10
losing factory – well, they just can’t. The law is clear: the corporation’s board of directors, not its
shareholders, runs the business.
Someone naïve in the ways of US corporations might say that these rules are paper-thin, because
shareholders can just elect new directors if the incumbents are recalcitrant. As long as they can
elect the directors, one might think, shareholders rule the firm. That would be plausible if
American corporate ownership were concentrated and powerful, with major shareholders owning,
say, 25% of a company’s stock – a structure common in most other advanced countries, where
families, foundations, or financial institutions more often have that kind of authority inside large
firms.
But that is neither how US firms are owned, nor how US corporate elections work. Ownership in
large American firms is diffuse, with block-holding shareholders scarce, even today. Hedge funds
with big blocks of stock are news, not the norm.
Corporate elections for the directors who run American firms are expensive. Incumbent directors
typically nominate themselves, and the company pays their election expenses (for soliciting votes
from distant and dispersed shareholders, producing voting materials, submitting legal filings, and,
when an election is contested, paying for high-priced US litigation). If a shareholder dislikes, say,
how GM’s directors are running the company (and, in the 1980’s and 1990’s, they were running
it into the ground), she is free to nominate new directors, but she must pay their hefty elections
costs, and should expect that no one, particularly not GM, will ever reimburse her. If she owns
100 shares, or 1,000, or even 100,000, challenging the incumbents is just not worthwhile.
Hence, contested elections are few, incumbents win the few that occur, and they remain in
control. Firms and their managers are subject to competitive markets and other constraints, but
not to shareholder authority.
In lieu of an election that could remove recalcitrant directors, an outside company might try to
buy the firm and all of its stock. But the rules of the US corporate game – heavily influenced by
directors and their lobbying organizations – usually allow directors to spurn outside offers, and
even to block shareholders from selling to the outsider. Directors lacked that power in the early
1980’s, when a wave of such hostile takeovers took place; but by the end of the decade, directors
had the rules changed in their favor, to allow them to reject offers for nearly any reason. It is now
enough to reject the outsider’s price offer (even if no one else would pay more).
American corporate-law reformers have long had their eyes on corporate elections. About a
decade ago, after the Enron and WorldCom scandals, America’s stock-market regulator, the
Securities and Exchange Commission (SEC), considered requiring that companies allow qualified
shareholders to put their director nominees on the company-paid election ballot. The actual
proposal was anodyne, as it would allow only a few directors – not enough to change a board’s
majority – to be nominated, and voted on, at the company’s expense.
Nevertheless, the directors’ lobbying organizations – such as the Business Roundtable and the
Chamber of Commerce (and their lawyers) – attacked the SEC’s initiative. Lobbying was fierce,
and is said to have reached into the White House. Business interests sought to replace SEC
commissioners who wanted the rule, and their lawyers threatened to sue the SEC if it moved
11
forward. It worked: America’s corporate insiders repeatedly pushed the proposal off of the SEC
agenda in the ensuing decade.
Then, in the summer of 2010, after a relevant election and a financial crisis that weakened
incumbents’ credibility, the SEC promulgated election rules that would give qualified
shareholders free access to company-paid election ballots. As soon as it did, the US managerial
establishment sued the SEC, and government officials felt compelled to suspend the new rules
before they ever took effect. The litigation is now in America’s courts.
The lesson is that the US is less capitalist than it is “managerialist.” Managers, not owners, get
the final say in corporate decisions. Perhaps this is good. Even some capital-oriented thinking
says that shareholders are better off if managers make all major decisions. And often the interests
of shareholders and managers are aligned.
But there is considerable evidence that when managers are at odds with shareholders, managerial
discretion in American firms is excessive and weakens companies. Managers of established firms
continue money-losing ventures for too long, pay themselves too much relative to their and the
company’s performance, and too often fail to act aggressively enough to enter new but risky
markets.
When it comes to capitalism vs. socialism, we know which side the US is on. But when it’s
managers vs. capital-owners, the US is managerialist, not capitalist.
Read more at http://www.project-syndicate.org/commentary/how-capitalist-is-
america#HJJDPhJCGr27DGfD.99
12
PART V
KPN
KPN “Poison Pill’s” Slim’s Takeover Bid CAPITAL MARKETS
Source: http://www.internationalfinancemagazine.com/article/KPN-Poison-Pills-Slims-
Takeover-Bid.html
“The soccer rules in Mexico and Netherlands are the same, but taking over a large company
is not soccer. We may have different rules for this here than in Mexico,” said Jacques
Schraven, who heads the foundation.
21st October 2013
Mexican Billionaire Carlos Slim’s effort to take over Dutch Telecom Company, Royal KPN NV, was
foiled by the KPN foundation, set up to safe guard the company’s interests. The foundation moved to
block Carlos Slim’s proposed 7.2 billion – Euros ($ 9.52 billion) offer for the Dutch telecoms group,
ending his ambitions of extending his business interests in Europe. Earlier in August, the Mexican
billionaire had offered to acquire 70 percent of KPN for 2.40 Euros per share, or $ 9.5 billion through
his flagship company, America Movil. Slim’s America Movil already holds 30 percent of KPN, but the
surprise move by the foundation to thwart his efforts underlines the difficulty the tycoon faces in
extending his telecom empire outside Latin America.
Hostile Takeover?
KPN foundation was set up to safe guard key national infrastructure when the former state monopoly
was being privatized, the foundation said it would exercise a right to prevent – what it termed a
hostile takeover bid by America Movil- by issuing new preference shares with voting rights with 49.9
percent of the total shares, to protect other shareholder’s position. “The soccer rules in Mexico and
Netherlands are the same, but taking over a large company is not soccer. We may have different
rules for this here than in Mexico,” said Jacques Schraven, who heads the foundation.
Poison pill- The Dutch Version
The company managed to dodge on what it sees as a takeover-on-the- cheap from one of the
world’s richest men. The hostile approach of America Movil was foiled by the company by a strategy
known as “poison pill” which attempts to thwart hostile takeovers. The companies grant these
13
foundations a call-option to buy preference shares which, if activated, will seize control over the
company for a limited period of time. In the 1980’ and 1990’s many Dutch firms used such defences
to protect themselves against hostile takeovers or activist inventors. The defense is not used
frequently, but experts say it is a measure of last resort that deter investors in ordinary shares and
only buys time to look for alternative strategic options.
“The foundation has intervened in this way in order to safe guard the interests of KPN and its
stakeholders, including share holders, employees, trade unions, customers and Dutch society more
generally. ” it said in a statement. The foundation argued these interests were at risk as America
Movil had not consulted KPN before announcing its intention to make a takeover offer.
With a poison pill, the target company attempts to make its stock less attractive to the potential
acquirer. In this strategy the company may offer a preferred stock option to its share holders that give
special dividends or payments to their holders, the stock option is opened to the share holders when
there is threat of a takeover, the stock is worthless and is used to scare away the bidder who is
attempting to take over the company.
Talks will Resume- KPN Chief
KPN chief executive Eelco Blok said the situation was not yet cut-and-dried, but did not reveal an
asking price which could be considered acceptable by KPN for the takeover bid. America Movil has
not shown any willingness to improve its earlier offer of 2.40 Euros per share, despite several recent
developments including KPN’s agreement to sell its German unit E-Plus to Telefonica and the
acquisition of shares by the foundation. The shareholder foundation which foiled the takeover bid
said that it had “never aimed to block the deal, but to get the two parties to the negotiating table to
come to a merger protocol in a suitable way”.
Hard Pill to Swallow
“It is the first time we have seen Mr.Slim being squeezed” said a telecom analyst; Mr.Slim has
conceded defeat in the 7.2 billion Euros offer ($ 9.8 billion) for the 70 percent stake he didn’t own in
KPN. The Financial times reported that this move could signal an attempt by Mr.Slim to back away
from Europe to focus on Brazil, where the sector could witness significant changes triggered by
Telecom Italia’s mooted sale of its Brazilian unit.
America Movil, whose market dominance is presently facing stiff challenges from regulators in
Mexico and Colombia had offered 2.40 Euros a share for KPN, which has been trading around 2.30
since the offer, were down 8.8 percent to 2.22 Euros, well below the offer promised by Slim’s
America Movil.
14
ABN AMRO
Summary of the Court’s ruling of 13 July 2007 in ABN AMRO
cases
Background information
On 15 May 2007 the Hoge Raad (Supreme Court of The Netherlands) has received three appeals in cassation
against the ruling of the Enterprise Chamber of the Amsterdam Court of Appeal, dated 3 May 2007,
casenumber 451/2007 OK , (published on website rechtspraak.nl, numberBA4395) .
The appealing parties are:
ABN AMRO Holding N.V. and ABN AMRO Bank N.V., “ABN AMRO” (casenumber
R07/102) represented by mr. P.J.M. von Schmidt auf Altenstadt, advocate in The Hague
Bank of America Corporation (casenumber R07/100)
represented by mr. E. Grabandt, mr. S.M. Bartman and mr. J.P. Heering, advocates in The Hague
Barclays PLC (casenumber R07/101)
represented by mr. E. van Staden ten Brink, advocate in The Hague.
The following parties have challenged the appeals:
VEB, P. Schoenfeld Asset Management LLC, J.T.M. de Laat, J.F. van der Steene, J.D. Steneker and
J.A. de Vries, “VEB”
represented by mr. J.W.H. van Wijk, advocate in The Hague.
The Royal Bank of Scotland Group PLC, Fortis N.V., Fortis S.A./N.V. and Banco Santander Central
Hispano S.A., “ the Consortium”,
represented by mr. H.J.A. Knijff, advocate in The Hague.
This lawsuit focuses on the question whether the Board of Directors of ABN AMRO was allowed to sell its US
subsidiary LaSalle without prior approval by the general meeting of shareholders. This sale took place while
the Board of Directors was involved in exclusive negotiations with Barclays regarding a share merger. Before
the sale of LaSalle, a Consortium of three banks (Royal Bank of Scotland, Santander and Fortis) had
announced its intention to acquire the shares in ABN AMRO. The Consortium aims at the acquisition of ABN
AMRO including LaSalle.
VEB has requested the Enterprise Chamber of the Amsterdam Court of Appeal to set up an inquiry into the
policy and the conduct of business of ABN AMRO in relation to the sale of LaSalle. In addition, VEB has
applied for an interim injunction to suspend the sale of LaSalle in order to enable the general shareholders
meeting of ABN AMRO to vote on that transaction. The Enterprise Chamber has granted an interim injunction
to that effect. It is against this injunction that the present appeal in cassation has been lodged.
The judgement of the Enterprise Chamber with regard to the interim injunction
In brief, the Enterprise Chamber has ruled as follows:
1. it has not (yet) been established that the sale of LaSalle was concluded in order to frustrate a
competitive bid of the Consortium;
2. however, in view of the decision by the Board of Directors and of the Supervisory Board to put up for
sale ABN AMRO and find an acquisition candidate, the sale of LaSalle, which cannot be detached from the
15
intended merger of ABN AMRO and Barclays, exceeded the “conduct of business area that is reserved to
the Board of Directors and the Supervisory Board ”;
3. under the circumstances of the case, it would be contrary to the principles of reasonableness and
fairness, laid down in article 2:8 of the Dutch Civil Code (DCC), as well as the principle underlying article
2:107a DCC, if the general meeting of shareholders of ABN AMRO would not be allowed to “express their
views” on the sale of LaSalle;
4. for this reason the sale of LaSalle is suspended until the general meeting of shareholders has
approved the transaction.
The advisory opinion of mr. L. Timmerman, advocate-general at the Supreme Court
The advocate-general was of the opinion that neither the principles of reasonableness and fairness, laid down
in article 2:8 DCC, nor the underlying principle of article 2:107a DCC require the LaSalle transaction being
subject to prior approval by the general meeting of shareholders. For this reason, he recommended the
Supreme Court to set aside the decision of the Enterprise Chamber.
The judgment of the Supreme Court
In brief the Supreme Court has ruled as follows:
1. The Enterprise Chamber has considered the sale of LaSalle to Bank of America not to be an unlawful
anti-takeover measure by ABN AMRO Holding. This opinion was upheld in cassation.
2. The Enterprise Chamber rightly held that (a) as a rule the Board of Directors of ABN AMRO was
entitled to sell LaSalle and that (b) article 2:107a, paragraph 1, DCC does not confer to the shareholders
a right of approval with regard to the sale of LaSalle.
3. Contrary to the Enterprise Chamber’s ruling, such a right of approval cannot be assumed in the light
of special circumstances and is not required by the principles of proper corporate governance (article 2:8
and article 2:9 DCC). The Board of Directors shall put the interest of the company and the enterprise
connected therewith first. The fact that the shareholders aim at selling their shares at the highest possible
price involves no obligation for the Board of Directors of ABN AMRO to obtain the shareholders’ approval
of the sale of LaSalle, nor does such an obligation arise from the prevailing views of the law in The
Netherlands.
4. Article 2:107a DCC should not be interpreted broadly nor applied to other cases than exactly those
to which it refers.
5. Now that the sale of LaSalle is definite, the interests of Bank of America and Barclays should be
taken into account. There should not be any unnecessary uncertainty about the carrying out of this
agreement, into which the Board of Directors of ABN AMRO was entitled to enter.
6. The Supreme Court holds that there are no grounds for granting the requested interim injunctions.
It sets aside the judgment of the Enterprise Chamber and dismisses the requested interim injunction.
Consequences of this ruling
7. The Supreme Court’s ruling implies that the appeals by Bank of America, Barclays and ABN AMRO
succeeded, whereas the appeal by VEB failed and its request for an interim injunction to suspend
(pending the approval by the shareholders) the contract of sale regarding LaSalle, was dismissed
irrevocably.
16
SELECTED ARTICLES OF BOOK 2 DUTCH CIVIL CODE
Below you will find a selection of provisions of Dutch company law to
be used during the sessions. Please note that these are not official translations.
Source: http://www.dutchcivillaw.com/civilcodebook022.htm
Article 2:24a Definition of a ‘subsidiary’
- 1. A subsidiary of a legal person is:
a. a legal person in which another legal person or one or more of its subsidiaries, whether or not under
a contract with other persons entitled to vote, is able to exercise, solely or jointly, more than one half
of the voting rights at the General Meeting;
b. a legal person with regard to which another legal person or one or more of its subsidiaries, whether
or not under a contract with other persons entitled to vote, is able to appoint or discharge, solely or
jointly, more than one half of the members of the Board of Directors or the Supervisory Board, even if
all persons entitled to vote would cast their vote.
- 2. With a subsidiary is equated a commercial partnership acting in its own name in which the legal
person or one or more of its subsidiaries participate as a partner who is fully liable towards the
creditors of that commercial partnership for all debts.
- 3. For the purpose of paragraph 1, rights attached to shares shall not be linked to a person who
holds these shares on behalf of someone else. Rights attached to shares shall be linked to the person
on whose behalf these shares are held, if this person has the power to decide how these rights are to
be exercised or if he has the power to acquire these shares.
- 4. For the purpose of paragraph 1, voting rights attached to pledged shares are linked to the pledgee
(holder of the pledge) if he has the power to decide how these rights are to be exercised. If the shares,
however, are encumbered with a pledge as security for a loan which the pledgee has provided in the
ordinary course of his business, then the voting rights shall only be linked to him if he has exercised
them in his own interest.
Article 24b Definition of a ‘group’
A group is an economic unit in which legal persons and commercial partnerships are organizationally
interconnected. Group companies are legal persons and commercial partnerships interconnected to
each other in one group.
Article 2:107a Resolutions that need the approval of the General Meeting
- 1. Resolutions of the Board of Directors leading to changes in the identity or character of the
Corporation or its enterprise must be approved by the General Meeting, among which in any case
17
resolutions for:
a. a transfer of the enterprise or of practically the entire enterprise to a third party;
b. the start or termination by the Corporation or its subsidiary of a long-lasting alliance with another
legal person or of a commercial partnership, or the start or termination by the Corporation or its
subsidiary as fully liable partner in a limited partnership (''commanditaire vennootschap') or general
partnership ('vennootschap onder firma'), always only when the start or termination of such alliance or
partnership is of fundamental importance for the Corporation;
c. the acquisition or disposal of a participating interest in the capital of another legal person to the
value of at least one third of the amount of the assets according to the Corporation's balance sheet
with explanatory notes or, if the Corporation makes use of a consolidated balance sheet, according to
its consolidated balance sheet with explanatory notes, always according to the last adopted annual
accounts of the Corporation.
- 2. The absence of the General Meeting's approval on a resolution as referred to in paragraph 1, does
not affect the authority of representation of the Board of Directors or the Directors.
- 3. When the Open Corporation (’naamloze vennootschap’) has established a Works Council by virtue
of statutory provisions, the request for an approval shall not be presented to the General Meeting than
after the Works Council has been given the opportunity, timely prior to the convening date referred to
in Article 1:114, to determine its point of view on the matter. The Works Council’s point of view is
offered simultaneously with the request for an approval to the General Meeting. The chairman or a
member of the Works Council assigned by him to this end may elucidate the Works Council’s point of
view at the General Meeting. The absence of that point of view does not affect the decision-making
over the request for an approval.
- 4. For the purpose of paragraph 3, by a Works Council is understood also the Works Council of the
enterprise of a subsidiary company, provided that the employees in service of the Open Corporation
(‘naamloze vennootschap’) and the group companies in majority are working within the Netherlands.
When there are more Work Councils than one, the power meant in the present Article is exerted by
these Councils jointly. Where a Central Works Council has been established for the relevant enterprise
or enterprises, the before meant power belongs to that Central Works Council.
Article 2:138 Liability of the Directors in the event of a bankruptcy of the Open Corporation
- 1. In the event of a bankruptcy of the Open Corporation ('naamloze vennootschap'), each Director is
towards the liquidation estate jointly and severally liable for the amount of the debts as far as these
cannot be recovered after the assets of the Corporation have been wound up, if the Board of Directors
has performed its duties clearly improperly and it is likely that this is a major cause of the
Corporation's bankruptcy.
- 2. If the Board of Directors has not complied with its obligations under Article 2:10 or 2:394, then it
shall have performed its duties improperly and it is presumed that this improper performance of duties
is a major cause of the Corporation's bankruptcy. The same applies if the Corporation is a fully liable
partner in a general partnership (vennootschap onder firma) or a limited partnership ('commanditaire
vennootschap') and the obligations of Article 3:15i have not been complied with. An insignificant
omission (default) is, however, not taken into account.
- 3. A Director who proves that the improper performance of duties by the Board of Directors is not
attributable to him and that he has not been negligent in taking measures to avert the consequences
thereof, is not liable.
- 4. The court may reduce the amount for which the Directors are liable if it regards this amount to be
excessive, given the nature and seriousness of the improper performance of duties by the Board of
18
Directors, the other causes of the bankruptcy and the way in which the liquidation estate has been
wound up. The court may furthermore reduce the amount of liability of an individual Director if it
regards this amount to be excessive in view of the time during which that Director has been in office in
the period when the improper performance of duties took place.
- 5. Where the amount of the deficit of the liquidation estate is still unknown, the court may determine,
whether or not under application of paragraph 4, which part of the deficit has to be paid by the
Directors personally, and it may order the preparation of a deficit list in accordance with the provisions
of Title 6 of Book 2 of the Code of Civil Procedure.
- 6. A legal action (claim) against one or more Directors can be filed only on the basis of the present
Article on the ground of an improper performance of duties which took place in the period of three
years preceding the Corporation's bankruptcy. The fact that a Director has been discharged from
liability, does not preclude the filing of a legal action (claim) as meant in the previous sentence.
- 7. For the purpose of the present Article, a person who has actually determined or co-determined the
policy of the Corporation as if he were a Director, is equated with a Director. A legal action (claim) as
meant in the present Article cannot be filed against an administrator appointed by the court.
- 8. The present Article does not affect the possibilities of the liquidator in the bankruptcy of the
Corporation to file a legal action (claim) against a Director on the basis of the agreement between the
Corporation and the Director or on the basis of Article 2:9.
- 9. Where a Director is liable pursuant to the present Article, but he is unable to pay the debt which
has arisen as a consequence thereof, the liquidator in the bankruptcy of the Corporation may, on
behalf of the liquidation estate, nullify by means of an extrajudicial declaration all juridical acts which
have been performed by the Director without any legal obligation to do so, and which have harmed the
recovery rights against his own property, if it is plausible that these juridical acts have been performed
only or mainly with the intention to harm these recovery rights. Article 3:45, paragraph 4 and 5,
applies accordingly.
- 10. Where the liquidation estate of the Corporation is insufficient to file a legal action (claim) on the
basis of the present Article or of Article 2:9 or to make preliminary inquiries as to the possibilities to
file such actions (claims), the liquidator in the bankruptcy of the Corporation may request the Minister
of Justice to provide him the necessary funds by way of an advanced payment. The Minister may set
rules for the assessment of the merits of such request and for the limits within which the request may
be granted. The request must contain the grounds on which it is based, and a reasoned estimate of the
cost and extent of the inquiries. Where the request concerns the start of preliminary inquiries it needs
the approval of the magistrate in bankruptcy ('rechter-commissaris').
Section 2.4.3 The capital of an Open Corporation
Article 2:93 Juridical acts performed in the name of a still to be formed Open Corporation
- 1. It is possible to perform juridical acts in the name of an Open Corporation ('naamloze
vennootschap') which still has to be formed (incorporated); from such juridical acts, however, can only
arise rights and obligations for the Corporation when it has ratified these juridical acts after its
formation (incorporation), either explicitly or tacitly, or when it has become engaged (bound) due to
paragraph 4.
- 2. The persons who have performed a juridical act in the name of a still to be formed Corporation,
are jointly and severally liable for that act until the Corporation has ratified it after its formation
(incorporation), unless the contrary has been stipulated explicitly in respect of that juridical act.
- 3. If the Corporation has ratified the juridical act but fails to perform the obligations which arise from
it, then the persons who have acted in the name of the still to be formed Corporation are jointly and
severally liable for the damage which a third person suffers as a result, if they knew or reasonably
could have known that the Corporation could not comply with these obligations, all without prejudice to
any possible liability of the Directors on account of a ratification. The knowledge that the Corporation
19
could not comply with its obligations, is presumed to be present when the Corporation is declared
bankrupt within one year after its formation (incorporation).
- 4. In the notarial deed of incorporation the founders (incorporators) can only engage (bind) the
Corporation directly to the following juridical acts: the issuance of shares, the acceptance of
contributions paid up on those shares, the appointment of Directors, the appointment of Supervisory
Directors and the performance of juridical acts as meant in Article 2:94, paragraph 1*). If a founder
(incorporator) has observed insufficient diligence in respect thereof, then Articles 2:9 and 2:138 shall
apply accordingly.
Section 2.4.5 The Board of Directors of an Open Corporation and the
supervision of the Board of Directors
Article 2:129 Tasks and powers of the Board of Directors
- 1. Subject to any restrictions under the articles of incorporation, the Board of Directors is charged
with the governance (management) of the Corporation
- 2. The articles of incorporation may provide that a particular Director designated by name or function
(position), may cast more than one vote. One Director may not cast more votes than the other
Directors combined.
- 3. Resolutions of the Board of Directors can only be subjected by or pursuant to the articles of
incorporation to the approval of a body of the Corporation.
- 4. The articles of incorporation may provide that the Board of Directors should behave according to
the instructions of a body of the Corporation on the general policy which is to be pursued on areas set
in the articles of incorporation.
- 5. The Directors shall in the performance of their duties direct their attention to the interests of the
Corporation and of the enterprises connected with it. *)
- 6. A Director does not participate in the deliberations and decision-making if he has a direct or
indirect personal interest therein that is contrary to the interests meant in paragraph 5. If, as a result,
no Board resolution can be passed, the resolution shall be passed by the Supervisory Board. In the
absence of a Supervisory Board, the resolution shall be passed by the General Meeting, unless the
articles of incorporation provide otherwise.*)
- 7. If shares in the Corporation or depository receipts for shares issued in cooperation with the
Corporation are admitted for trade to a regulated market as meant in Article 1:1 of the Financial
Supervision Act , and a Director holds shares in the Corporation or rights have been granted to him to
subscribe on or acquire shares in the capital of the Corporation, then the Corporation shall, if it makes
public (discloses) that it has passed a resolution as meant in Article 2:107, paragraph 1, under (a), (b)
or (c) or that a public bid is announced as referred to in Article 5 of the Decree Public Bids Wft, assess
the value which the shares or rights of the Director had, after closing of the stock exchange, four
weeks prior to the day on which this resolution has passed or a public bid was announced. Four weeks
after that resolution or, if a public bid has been announced, for weeks after the ending of that public
bid, the value of the shares or rights shall be assessed again after closing of the stock exchange. If the
value has increased compared to the earlier assessment, the Director has to pay that increase in value
to the Corporation. The Supervisory Board shall assess the increase in value. Where Article 2:129a is
applied, the Board of Directors shall asses the increase in value, yet without any participation of the
executive Directors in the decision-making. *)
*) In force as of 01-01-2013.
20
Article 2:129a Division between non-executive and executive Directors*)
- 1. The articles of incorporation may specify that the duties of the Directors are divided between one
or more non-executive Directors and one or more executive Directors. The duty to supervise the
performance of duties by the Directors cannot be taken away from a non-executive Director by a
division of duties as meant in the previous sentence. Te chairmanship of the Board of Directors, the
making of proposals for the appointment of a Director and the adoption (assessment) of the
remuneration of the executive Directors may not be assigned to an executive Director. Non-executive
Directors are always natural persons.
- 2. The executive Directors do not participate in the decision-making on the adoption (assessment) of
the remuneration of executive Directors.
- 3. It is allowed to specify by or pursuant to the articles of incorporation that one or more Directors
may decide (pass resolutions) legitimately in regard of subjects belonging to his or their duty. When
such specification is made pursuant to the articles of incorporation, this must be done in writing.
*) In force as of 01-01-2013.
Article 2:130 Power of representation
- 1. The Board of Directors represents the Corporation as far as the law does not provide otherwise.
- 2. Each Director may also individually represent the Corporation. The articles of incorporation may,
however, provide that only one or more of the Directors may represent, next and in addition to the
Board of Directors, the Corporation. The articles of incorporation may provide furthermore that a
Director only has the power to represent the Corporation in cooperation with one or more other
persons.
- 3. The power of representation of the Board of Directors or of the Directors to whom such power is
granted, either individually or jointly with others, is always unrestricted and unconditional, as far as
the law does not provide otherwise. A legally permitted or required restriction or condition regarding
the power of representation can only be invoked by the Corporation.
- 4. The articles of incorporation may also grant other persons than Directors the power to represent
the Corporation.
Book 2 Legal Persons
Title 2.5 Closed Corporations (private limited companies)
Article 2:216 Distribution of profits
- 1. The General Meeting is empowered with the allocation (appropriation) of the profits which have
been determined by adoption of the annual accounts, and with the adoption of the distributions, to the
extent that the equity (total assets and liability) of the Closed Corporation (‘besloten vennootschap’)
exceeds the reserves which have to be maintained by virtue of law or the articles of incorporation. The
articles of incorporation may limit the powers meant in the first sentence or assign these to another
body of the Closed Corporation.
- 2. A resolution (decision) for a distribution has no effect as long as the Board of Directors has not
21
given its approval to it. The Board of Directors shall only deny its approval if it knows or reasonably
ought to foresee that the Closed Corporation (‘besloten vennootschap’), after the distribution, shall no
longer be able to continue the payment of its due and collectable debts.
- 3. If the Closed Corporation (‘besloten vennootschap’), after a distribution, is not able to continue the
payment of its due and collectable debts, then the Directors who knew that result at the moment of
the distribution or who reasonably ought to have foreseen that result at that moment, are joint and
several liable towards the Closed Corporation (‘besloten vennootschap’) for compensation of the deficit
which has arisen on account of the distribution, raised with the statutory interest running as of the day
of distribution. Article 2:248, paragraph 5, applies accordingly. Not liable is the Director who proves
that it is not due to him that the Closed Corporation (‘besloten vennootschap’) has made the
distribution and, in addition, that he has not been negligent in taking measures to avert the
consequences thereof.
The person who acquired the distribution while he knew or reasonably ought to have foreseen that the
Closed Corporation (‘besloten vennootschap’) would no longer be able to continue the payment of its
due and collectable debts after the distribution, is towards the Closed Corporation (‘besloten
vennootschap’) liable for compensation of the deficit which has arisen on account of the distribution, to
at the most the amount or value of the distribution he received, raised with the statutory interest
running as of the day of distribution.
When the Directors have paid the debt-claim by virtue of the first sentence, then the compensation
meant in the third sentence is made to them in proportion to the part that each Director has paid. With
regard to a debt that is imposed pursuant to the first or third sentence, the debtor has no right of
setoff.
- 4. For the purpose of paragraph 3 a Director is equated with a person who has laid down the
corporate policy or has co-participated therein as if he was a Director. The legal claim (right of action)
cannot be filed against an administrator appointed by the court.
- 5. In calculating each distribution, the shares that the Closed Corporation (‘besloten vennootschap’)
holds in its own capital (treasury shares) are not taken into account, unless the articles of
incorporation provide otherwise.
- 6. In calculating the amount which is to be distributed on each share, only the amount of the
obligatory payments on the nominal amount of the shares is taken into account. It is possible to
derogate from the previous sentence in the articles of incorporation or each time with the approval of
all shareholders.
- 7. The articles of incorporation may provide that shares of a certain type (class) or indication do not
or only in a limited way enclose a right of sharing in the profits or reserves of the Closed Corporation
(‘besloten vennootschap’).
- 8. For an arrangement in the articles of incorporation as meant in paragraph 6 or 7, the approval is
required of all holders of shares whose rights are harmed by such amendment of the articles of
incorporation.
- 9. The articles of incorporation may provide that the claim of a shareholder does not become
prescribed after a period of five years, but shall elapse after a longer period of time. Such a provision
in the articles of incorporation shall in that event apply accordingly to the claim of a holder of a
depository receipt against the shareholder of the share for which that depository receipt was issued.
- 10. The articles of incorporation may provide that the profits to which holders of shares of a specific
type (class) are entitled, shall be reserved in full or in part for their benefit.
- 11. Paragraph 3 does not apply to distributions in the form of shares in the capital of the Closed
Corporation (‘besloten vennootschap’), nor to the crediting of not paid up shares.
22
Section 2.5.5 The Board of Directors of a Closed Corporation and the
supervision of the Board of Directors
Article 2:239 Tasks and powers of the Board of Directors
- 1. Subject to any restrictions under the articles of incorporation, the Board of Directors is charged
with the governance (management) of the Corporation
- 2. The articles of incorporation may provide that a particular Director designated by name or function
(position), may cast more than one vote. One Director may not cast more votes than the other
Directors combined.
- 3. Resolutions of the Board of Directors can only be subjected by or pursuant to the articles of
incorporation to the approval of a body of the Corporation.
- 4. The articles of incorporation may provide that the Board of Directors has to behave itself according
to the instructions of another body of the Corporation. The Board of Directors is compelled to follow
the instructions, unless these are in conflict with the interests of the Corporation or of the enterprise
connected with it.
- 5. The Directors shall in the performance of their duties direct their attention to the interests of the
Corporation and of the enterprises connected with it. *)
- 6. A Director does not participate in the deliberations and decision-making if he has a direct or
indirect personal interest therein that is contrary to the interests meant in paragraph 5. If, as a result,
no Board resolution can be passed, the resolution shall be passed by the Supervisory Board. In the
absence of a Supervisory Board, the resolution shall be passed by the General Meeting, unless the
articles of incorporation provide otherwise.*)
*) In force as of 01-01-2013.
Article 2:239a Division between non-executive and executive Directors*)
- 1. The articles of incorporation may specify that the duties of the Directors are divided between one
or more non-executive Directors and one or more executive Directors. The duty to supervise the
performance of duties by the Directors cannot be taken away from a non-executive Director by a
division of duties as meant in the previous sentence. Te chairmanship of the Board of Directors, the
making of proposals for the appointment of a Director and the adoption (assessment) of the
remuneration of the executive Directors may not be assigned to an executive Director. Non-executive
Directors are always natural persons.
- 2. The executive Directors do not participate in the decision-making on the adoption (assessment) of
the remuneration of executive Directors.
- 3. It is allowed to specify by or pursuant to the articles of incorporation that one or more Directors
may decide (pass resolutions) legitimately in regard of subjects belonging to his or their duty. When
such specification is made pursuant to the articles of incorporation, this must be done in writing.
*) In force as of 01-01-2013.
23
Article 2:240 Power of representation
- 1. The Board of Directors represents the Corporation as far as the law does not provide otherwise.
- 2. Each Director may also individually represent the Corporation. The articles of incorporation may,
however, provide that only one or more of the Directors may represent, next and in addition to the
Board of Directors, the Corporation. The articles of incorporation may provide furthermore that a
Director only has the power to represent the Corporation in cooperation with one or more other
persons.
- 3. The power of representation of the Board of Directors or of the Directors to whom such power is
granted, either individually or jointly with others, is always unrestricted and unconditional, as far as
the law does not provide otherwise. A legally permitted or required restriction or condition regarding
the power of representation can only be invoked by the Corporation.
- 4. The articles of incorporation may also grant other persons than Directors the power to represent
the Corporation.
Article 2:241 Jurisdiction in relation to the (employment) contract between the Corporation
and its Director
The District Court within whose district the Corporation is domiciled (has its seat), has jurisdiction over
all legal actions (lawsuits) based on the contract (employment agreement) between the Closed
Corporation ('besloten vennootschap') and one of its Directors, including the legal claim referred to in
Article 2:248 of which the amount is undetermined or exceeds € 25,000. The same District Court has
jurisdiction over applications (requests) meant in Article 7:685 related to a contract (employment
agreement) as referred to in the first sentence of the present Article. Legal claims (lawsuits) as meant
in the first two sentences are not considered or decided by the Subdistrict Court.
Article 2:242 Appointment of Directors
- 1. The first Directors of the Corporation are appointed in the notarial deed of incorporation; the
following (succeeding) Directors are appointed by the General Meeting. If the Corporation has made
use of the possibility to apply Article 2:239a, the General Meeting shall decide whether a Director is
appointed as an executive or non-executive Director. The previous two sentences do not apply if the
Supervisory Board has the right to appoint the Director pursuant to Article 2:272.
- 2. The articles of incorporation may limit the circle of persons qualified to be appointed as Director by
setting requirements which such Directors have to meet. The requirements may be set aside by a
resolution of the General Meeting passed in conformity with the rules that apply to the validity of a
resolution for an amendment of the articles of incorporation.
Technology & Innovation Management Technology & Innovation Managemen
International
Executive Master of Auditing
FINANCIAL ACCOUNTING
COURSE MANUAL
Cohort 2014
IEMA2014
All rights reserved. No part of this publication may be reproduced or utilized in any
form or by any means, electronic or mechanical, including photocopying, recording
or by any information storage or retrieval system, without prior written permission
from the copyright owner, or, as the cases may be, the publishers, beyond the
exceptions provided by the Copyright Law.
2
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1. Introduction
The course Financial Accounting focuses on the international institutional framework
related to financial accounting and reporting, as well as on the International Financial
Reporting Standards (IFRS) for more in depth knowledge of students about topics. A
number of specializations are part of the program, in particular:
Post-employment benefits;
Share-based payments;
Business combinations;
Impairment;
Financial instruments, and
Disclosures.
In addition, students will learn to critically evaluate and discuss existing annual financial
statements and reports based on IFRS, for example, issues concerning revenue
recognition, provisioning, income taxes, off-balance sheet financing, as well as the
specific topics mentioned above. Part of the program is also creating awareness on the
subject of the role of the auditor in (ethical aspects of) accounting issues and the
importance of communicating these issues with company managements and audit
committees.
Effective application of IFRS is trained by means of case studies. Attention is paid to
problem recognition, communication, ethics and the role of the auditor in reporting
issues. Current news topics in the international regulations are included in the program,
such as on financial instruments (IFRS 9) and developments in sustainability and
integrated reporting.
The aspects of Financial Accounting are part of two modules, namely:
An international module; and
A country specific module.
The international module covers international accounting and reporting issues. Therefore,
it deals with EU and IASB governance, US GAAP highlights and other international law
and regulatory issues. The international module especially covers IFRS.
The country specific module (CSM) covers national law and regulatory issues related to
financial accounting and reporting, specifically national institutional framework and
national accounting standards. In CSM for the Netherlands, this includes national law
(Title 9 Book 2 Dutch Civil Code) and the Dutch Accounting Standards (DAS, Richtlijnen
voor de jaarverslaggeving) with a focus on the differences between the national
standards and IFRS, as well as the reporting requirements under the Dutch corporate
governance code. In addition, attention is given to organizations with country-specific
regulation, such as financial institutions, government organizations and not-for-profit
organizations.
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2. Goals of the Course
The objectives of this course are twofold. First, students should obtain a solid knowledge
of the accounting standards and of part of academic literature on financial accounting.
For that purpose, IFRS and a textbook are discussed. This textbook by Walton and Aerts
deals with the principles and analysis of financial accounting and reporting. This book, as
well as IFRS, are mandatory. Also, an explanatory textbook about IFRS, such as Insights
into IFRS by KPMG, is recommended. With regard to the Dutch country specific module,
Title 9 Book 2 Dutch Civil Code and the Dutch Accounting Standards are discussed, as
well as some accompanying readings, especially about differences between IFRS and
Dutch generally accepted accounting principles (Dutch GAAP).
The second objective of this course is to obtain skills that are important in analyzing and
evaluating financial accounting issues, while using the relevant financial reporting
standards. To train students' practical skills, cases on various aspects of accounting
issues will be discussed, e.g. on definition, scope, recognition, measurement,
presentation, disclosure. More specifically, the purposes of these cases are to develop
students' problem solving skills in accounting issues, as well as students' communicating
skills concerning (ethical aspects of) accounting issues.
3. Examination of the Course
The Financial Accounting exam consists of a written examination (one exam of
approximately three hours). In order to pass the exam, it needs to be minimally graded
with a 6 on a scale from 1-10. The exam consists of an international part, representing
the international module, and for students participating in the Dutch CSM, also a country
specific part, representing the Dutch accounting standards.
The exam will take place mid-2016. The resit will take place in the second half of 2016.
See the Education and Examination Regulations 2014-2015 for more detailed information
on the examination and examination rules.
4. Literature
The following literature is used regarding the international module:
IASB, International Financial Reporting Standards, Blue Bound Volume, part A&B
(set of 2), edition 2014 (ISBN 978-1-909704-17-6) or more recent
IASB, International Financial Reporting Standards, IFRS 9 Financial Instruments,
2014 (ISBN 978-1-909704-47-3)
Global Financial Accounting and Reporting, Principles and Analysis, Walton &
Aerts, 3rd edition, 2013, ISBN 978-1-408062-86-9
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Technology & Innovation Management Technology & Innovation Managemen
The following literature is used regarding the Dutch country specific module:
Dutch Civil Code Book 2, Title 9, Annual Accounts and Annual Report
DASB, Parts of Dutch Accounting Standards edition 2013 and Decree on Current
Value (provided in class)
Deloitte, The Annual Accounts in the Netherlands – A guide to Title 9 of the
Netherlands Civil Code, 2013 or more recent
Deloitte, IFRSs and NL GAAP, Highlighting the key differences, November 2013 or
more recent
Recommended literature regarding the international module:
KPMG, Insights into IFRS, 11th edition, 2014
5. Lecturers
The course is coordinated by Chris Falk CPA and prof. dr. mr. Frans van der Wel RA.
Lectures will be given by (see course overview below):
- Petra Brand RA
- Chris Falk CPA
- Prof. dr. Peter Sampers RA
- Prof. dr. mr. Frans van der Wel RA
6. Course overview
Session Theme Lecturer
Literature
October
2014
Fair value measurement
Share-based payments
Post-employment benefits
Business combinations
Financial instruments
Cycles: Financial accounting
concepts and basic reporting
models
Petra Brand
Peter Sampers
Frans van der Wel
Chris Falk
IFRS 13
IFRS 2
IAS 19
IFRS 3, 10-12
IAS 39
Textbook, chapter ..
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December
2014
Financial instruments
(continued)
Disclosures
Cycles: sales/revenue and
collection
Chris Falk IAS 39
IFRS 7, IAS 1, IAS
36
Textbook, chapter ..
May 2015
Financial instruments – IFRS
9
International institutional
framework and supervision
Financial institutions
Peter Sampers IFRS 9
October
2015
Cycles: supply chain
Cycles: finance and
investing activities
Chris Falk Textbook, chapter ..
Textbook, chapter ..
December
2015
CSM: Institutional
framework and supervision
CSM: Specific Dutch
accounting standards
CSM: Not for profit
organisations
CSM: Public sector reporting
t.b.a
Relevant DASs
Relevant DASs
May 2016 t.b.a.
Exam
t.b.a
7. Homework/ long distance learning
In between the seminars, students need to prepare and hand in homework cases as part
of the exam preparation.
Financial Accounting homework cases will be published on Blackboard in Q1 2015.
Students need to hand in at least 75% of all cases (graded “sufficient”) in time in order
to be admitted to the exams.
Technology & Innovation Management Technology & Innovation Managemen
International
Executive Master of Auditing
Financial Management
Mathematics & Statistics
COURSE MANUAL
Cohort 2014
IEMA2015
All rights reserved. No part of this publication may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage or retrieval system, without prior written permission from the copyright owner, or, as the cases may be, the publishers, beyond the exceptions provided by the
Copyright Law.
2
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1. Introduction
Financial Management (M&S) refers to the efficient and effective management of funds in
such a manner as to accomplish the objective of the organization. Financial Management
is about how to raise capital and how to allocate it. For the allocation a proper trade-off
between return and risk should be considered. It is about long term budgeting and how
to allocate the short term resources.
In this course we focus on decision making with long term consequences, focusing on the
returns and the risks. We will have a closer look at investment decisions and decisions
regarding pensions for a company and employee perspective. A large part of the course
will be on financial calculus of pensions.
2. Goals of the Course
The objectives of this course are twofold. First, students should obtain a solid knowledge
of the academic theory within the field of financial management and the basics of life
insurance mathematics. The second objective is to obtain skills that are important in
designing, using and evaluating investment decisions and pension plans of an
organization. To train student’s skills, cases on various topics will be discussed. More
specifically, the purpose of these cases is to expand the students' problem solving skills
in financial management issues. Furthermore, the course will assist in gaining insight into
mathematical and practical consequences in gains and losses of investment and pension
decisions.
3. Lectures and material
Lectures:
The theory will be covered during the lectures. Students are encouraged to ask questions and
participate actively to discuss the topic and the cases at hand. There will be 24 hours of lectures in
total. Several cases will be discussed.
The lectures will be given by:
- Eelke van der Meulen MSc AAG FRM RMFI
- Frank Pardoel MSc FRM.
Furthermore, students will work on case assignments during the lectures. For these assignments
students are required to use their calculator and laptop as they will have to work with excel sheets.
The presentations, cases and the answers to the cases will be uploaded on blackboard after the
lectures. There is no literature (books) for this course which have to be purchased.
Material:
Powerpoint presentations
Cases (including homework assignments)
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4. Course overview
Session Theme
June 2015
(4 hours)
Introduction to financial management
Capital management
Investment decisions
June 2015
(8 hours)
Interest rates
Valuing flexibility
Derivatives
Introduction to pensions
Financial calculus
Mortality calculus
September/
October 2015
(8 hours)
Patterns in pension benefits and premiums
Technical provisions
Flexibility in pensions
Defined benefit versus defined contribution
Balance sheet and coverage ratio
September/
October 2015
(4 hours)
Solvability
Asset and liability management
Risk management
November 30
2015
Exam
In between the separate lectures, students need to prepare homework cases as part of the exam preparation.
Homework cases are not graded.
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5. Examination of the Course
The Financial Management (M&S) exam consists of a written examination (3 hours). In order to pass the exam, it needs to be minimally graded with a 6 on a scale from 1-10.
The exam will take place on November 30, 2015. The resit exam will take place in May 2016. Please bring your own calculator to the exam. See the Education and Examination Regulations 2014-2015 for more detailed information on the examination and examination rules.
Technology & Innovation Management Technology & Innovation Managemen
International
Executive Master of Auditing
INTERNAL CONTROL &
ACCOUNTING INFORMATION SYSTEMS
COURSE MANUAL
Cohort 2014
IEMA2014
All rights reserved. No part of this publication may be reproduced or utilized in any
form or by any means, electronic or mechanical, including photocopying, recording
or by any information storage or retrieval system, without prior written permission
from the copyright owner, or, as the cases may be, the publishers, beyond the
exceptions provided by the Copyright Law.
2
Technology & Innovation Management Technology & Innovation Managemen
1. Introduction
The area of accounting information systems concerns the quality of (financial)
information, both for internal and external purposes. Like other business resources such
as labour, capital and raw materials, information is vital to the survival of the
contemporary business organization. Every business day, vast quantities of information
flow to decision makers within the organization. In addition, information flows out of the
organization to external users, such as customers, suppliers and stakeholders who have
an interest in the firm. Information, however, will only be useful to users if it meets their
quality needs. In this respect, quality of information can be defined as the degree to
which (a) measurement methods used to prepare information can represent what a
decision maker wants to know (information relevance) and (b) the stated methods have
been competently applied and results truthfully displayed (information reliability or
credibility). Hence, users require relevant and reliable information to make decisions. The
area of accounting information systems is aimed at providing high quality information for
decision-making.
The area of accounting information systems is closely related to disciplines such as
management accounting, management control, and information systems. The
relationship between these disciplines can be explained through the concept of
information. While the area of accounting information systems deals with the quality of
information for decision-making, the discipline of management accounting (and
management control) is concerned with the use of information for the purpose of making
decisions and ultimately controlling organizations. In contrast, the discipline of
information systems deals with the production of information. The link between the
disciplines is shown in the figure below.
Information Systems
Management Accounting & Management
Control
AccountingInformation Systems
Acc
oun
tin
g
Information and
comm
unication technology
Control
Information
Object of study
Discipline
Focal point
Behavioral
Mechanistic
Supply of informationDemand forinformation
Approach
Perspective
Figure 1.1: Object of study, disciplines, focal points and approaches in AIS and internal control(Source: Vaassen, E.H.J., Meuwissen, R.H.G., and C.C.M. Schelleman, 2009, Accounting Information Systems and Internal Control. Chichester: John Wiley & Sons)
3
Technology & Innovation Management Technology & Innovation Managemen
Furthermore, Accounting Information Systems (and Internal Control) may be considered
a discipline as well as a collection of systems. Hence, several definitions of the term
Accounting Information Systems exist in the literature. To avoid any confusion we
present the following definition that will be central in this course:
‘AIS studies the structuring and operation of planning and control processes which are
aimed at:
Providing information for decision-making and accountability to internal and
external stakeholders that complies with specified quality criteria.
Providing the right conditions for sound decision making.
Ensuring that no assets illegitimately exit the organization.’
This definition indicates that AIS aims at achieving high quality information within
organizations.
2. Goals of the Course
The objectives of this course are twofold. First, students should obtain a solid knowledge
of the academic literature on accounting information systems. To that end, two textbooks
as well as additional literature will be covered. The literature emphasizes several aspects
of accounting information systems, such as information quality, control environment,
segregation of duties, various control activities, internal control objectives, the link
between IT and control, and the design and evaluation of internal control systems for
various organizational processes.
The second objective of this course is for students to obtain skills that are important in
designing, using and evaluating accounting information and internal control systems. To
train students' practical skills, cases on various aspects will be discussed. More
specifically, the purposes of these cases are to develop students' problem solving skills in
internal control settings, and students' report-writing and oral presentation skills.
After completion of the course students should be able to give a description of internal
controls for a wide variety of organizations, evaluate the gaps in existing internal control
systems, assess the impact of information technology on internal controls, apply internal
controls in conjunction with management controls to solve control problems on all levels
– varying from operational to strategic – in organizations, provide solutions to
information problems in organizations, assess the strategic and process risks in a
business, and embed controls in a comprehensive enterprise risk management
framework.
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Technology & Innovation Management Technology & Innovation Managemen
3. Examination of the Course
The ICAIS course will be examined by a written IEMA exam of three hours. A minimum
grade of a 6 on a scale of 1-10 is required in order to pass the ICAIS IEMA exam. The
grade of the ICAIS IEMA exam will be rounded to the nearest integer.
This exam takes place in October 2015. The resit of the ICAIS IEMA exam takes place in
the period November 2015-May 2016.
Students are allowed to sit for the written ICAIS IEMA exam if they handed in at least
75% of the homework cases during the period December 2014-October 2015 (10 cases
in total). A case is only considered to be handed-in when the grader perceives that the
student put sufficient effort in the case solution.
Students who follow the Dutch Country Specific Module in order to obtain the RA title are
also required to pass the written national ICAIS exam and the ICAIS oral exam next to
the written ICAIS IEMA exam.
The written national ICAIS exam consists of 2 cases of three hours each. The ICAIS oral
exam is an oral exam of one hour. In order to pass the written national ICAIS exam,
both cases have to be graded with at least 5,0 each and for both cases together an
average grade of at least 5,5 needs to be obtained (i.e. minimum of 11 points for both
cases together). A minimum grade of a 6 on a scale of 1-10 is required in order to pass
the ICAIS oral exam. The written national ICAIS exam takes place in December 2015 and
the oral exam in January 2016 or April 2016. The resit of the written national ICAIS
exam takes place in June 2016. A resit for the oral exam will take place in the period May
2016-August 2016.
Students receive separate grades for the written and oral examinations. The grades of
both ICAIS examinations will be rounded to the nearest integer.
Students are allowed to sit for the written national ICAIS exam if they handed in at least
75% of the homework cases during the period October 2015-December 2015 (5 cases in
total). A case is only considered to be handed-in when the grader perceives that the
student put sufficient effort in the case solution.
Students are allowed to sit for the oral examination if they participated in the ICAIS IEMA
exam and the national ICAIS exam
See the Education and Examination Regulations 2014-2015 for more detailed information
on the examination and examination rules.
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Technology & Innovation Management Technology & Innovation Managemen
4. Literature
The following books will be used:
Accounting Information Systems and Internal Control
Vaassen, E.H.J., R.H.G. Meuwissen and C.C.M. Schelleman (ISBN 978-0-470753958).
Accounting Information Systems. Prentice Hall, 13th edition
Romney, M.B., and P.J. Steinbart (ISBN 978-1-292060521)
Further readings will be provided during the course.
5. Lecturers
The course is coordinated by prof. dr. Oscar van Leeuwen and prof.dr. Roger Meuwissen.
Lectures will be given by:
Prof. dr. Oscar van Leeuwen RA
Prof. dr. Roger Meuwissen RA
Drs. Robert Bertrand RA RC RO
6. Course overview
There will be lectures in October 2014, December 2014, May 2015, October 2015 and
December 2015. The courses in December 2015 are part for the Dutch national
examination.
In between the seminars, students need to prepare and hand in homework cases as part
of the exam preparation.
We expect to hand out:
- 4 homework cases in the period between December 2014 and May 2015
- 6 homework cases in the period between May 2015 and October 2015
- 5 homework cases in the period between October 2015 and December 2015 to prepare
for the Dutch Country Specific Module National exam
Technology & Innovation Management Technology & Innovation Managemen
International
Executive Master of Auditing
International Practice
COURSE MANUAL
Cohort 2014
IEMA2014
All rights reserved. No part of this publication may be reproduced or utilized in any
form or by any means, electronic or mechanical, including photocopying, recording
or by any information storage or retrieval system, without prior written permission
from the copyright owner, or, as the cases may be, the publishers, beyond the
exceptions provided by the Copyright Law.
2
Technology & Innovation Management Technology & Innovation Managemen
1. Introduction
The arena of global audit profession is becoming increasingly complex. One of the biggest
conversations to arise from the global financial crisis is: how can auditors and regulators
work together to help restore trust in the financial systems and prevent future crises – or
more specifically – how does the audit profession need to change to meet evolving
expectations?
Beyond auditing a company’s financial reporting, the public now expects auditors to help
identify strategic risks, including risks in the business model, or risks that could
potentially inhibit sustainable business. Who are the stakeholders and intended audience
of an auditor’s report under these new expectations?
Effectively fulfilling an auditor’s obligation in the global economy requires a strong
understanding of accounting standards of multiple jurisdictions, an appreciation of the
context and objectives behind regulations, best practices in quality assurance, risk
management and governance. In addition, we all have a role to play to contribute to
the development of a strong profession that has the public’s confidence.
2. Goals of the Course
The objectives of this course are twofold.
The first objective of this course is for students to obtain an understanding of the
management perspective of a global audit professional firm. Specifically, understanding
the global players, key business issues facing a global firm, the importance of quality and
governance, concepts around uniqueness of managing a professional service firms. Case
studies will be used to illustrate management issues, and facilitate discussion of what are
the characteristics of a successful firm. We will discuss the strategic agenda of audit
firms, particularly the need to better respond to the public interest.
The second objective is to give students a basic perspective of the key organizations in
the international auditing world, including IFIAR, IAASB and many others.
Finally, students should understand the specific characteristics of a group audit.
After completion of the course students should have a comprehensive understanding of
the current international regulatory requirements and how to conduct an international
audit to fulfill those requirements. Students should also have an appreciation of the
market and various stakeholders’ expectations of the profession’s role in safe guarding
public interest. Finally students should have an awareness of the management’s
perspective of the unique characteristics of a professional services firm: strategy,
management processes, culture, people development, leadership, and individual growth.
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3. Examination of the Course
The exam consists of a written examination. The written examination consists of a paper
that students should write about a prescribed theme. In order to pass the exam, the
examination needs to be passed with a minimum grade of a 6 on a scale from 1-10.
The written exams take place in July .
See the Education and Examination Regulations 2014-2015 for more detailed information
on the examination.
4. Literature
The following case studies and articles will be used:
Arthur Andersen (A): The Waste Management Crisis case
Arthur Andersen (B): From Waste Management to Enron case
Role of the auditor (PDF)
The Evolving Role of Auditors and Audit reporting.doc
Schilder address
Vodafone 2013 auditor’s report, case and PwC analysis.
Ahold Case
Charlotte Beers at Ogilvy & Mather Worldwide (A) case
Group Audit case
5. Lecturers
The course is coordinated by prof. dr. Roger Dassen
Lectures will be given by prof. dr. Roger Dassen
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6. Course overview
Session Theme Lecturer
Literature
[Day 1]
Global landscape of the
audit profession: key
players, key business
issues, expanded role of
auditors in society, and
professional obligations of
IFAC ISQC1.
Prof. dr. Roger
Dassen
Arthur Andersen
(A): The Waste
Management
Crisis case
Arthur Andersen
(B): From Waste
Management to
Enron case
[Day 2]
Regulatory stakeholders and
requirements:
Overview of key
international institutions
with deep dive into IFAC
and IAASB; extended
reporting requirements; ISA
600; Internal auditing in an
international context
Prof. dr. Roger
Dassen
Role of the
auditor (PDF)
The Evolving
Role of Auditors
and Audit
reporting.doc
Schilder address
Vodafone 2013
auditor’s report,
case and PwC
analysis.
Ahold Case
[Day 3]
Management perspective:
Theory of managing
professional services firms,
governance of audit firms,
critical issues facing our
profession
Prof. dr. Roger
Dassen
Group Audit
case (Flexibility)
Technology & Innovation Management Technology & Innovation Managemen
International
Executive Master of Auditing
Management Accounting
COURSE MANUAL
Cohort 2014
IEMA2014
All rights reserved. No part of this publication may be reproduced or utilized in any
form or by any means, electronic or mechanical, including photocopying, recording
or by any information storage or retrieval system, without prior written permission
from the copyright owner, or, as the cases may be, the publishers, beyond the
exceptions provided by the Copyright Law.
2
Technology & Innovation Management Technology & Innovation Managemen
1. Introduction
In the “Statement of Management Accountants” (SMA), the American Institute of
Management Accountants (IMA) presents a new definition of management accounting,
together with an explanation of the background leading to the new definition, the process
undertaken to prepare the definition, and the criteria and rationale used in developing
the new definition. The new definition is:
“Management accounting is a profession that involves partnering in management
decision making, devising planning and performance management systems, and
providing expertise in financial reporting and control to assist management in the
formulation and implementation of an organization’s strategy.”
Published by Institute of Management Accountants, 2008, Statements on Management Accounting – Practice of
Management Accounting, “The Definition of Management Accounting”, IMA, 10 Paragon Drive Montvale, NJ,
United States
The SMA continues to stress that…”the definition of a profession serves many purposes.
It can serve as a basis for teaching the cognitive aspects of the subject and for
evaluating the behaviors characteristic of the profession’s members. The definition can
also help define the place of the profession in society now and in the future, its
boundaries, and its identity. In recognition of this fact, the Institute of Management
Accountants issued its first “SMA” in 1981. Titled “Definition of Management Accounting”,
it defined management accounting as:
“…the process of identification, measurement, accumulation, analysis, preparation,
interpretation, and communication of financial information used by management to plan,
evaluate, and control an organization and to assure appropriate use of and accountability
for its resources. Management accounting also comprises the preparation of financial
reports for non-management groups such as shareholders, creditors, regulatory
agencies, and tax authorities.”
Published by Institute of Management Accountants, 2008, Statements on Management Accounting – Practice of
Management Accounting, “The Definition of Management Accounting”, IMA, 10 Paragon Drive Montvale, NJ,
United States
The field of management accounting has evolved considerably since the promulgation of
that definition. For more than a decade, IMA has supported and participated in research
that has included a call to action for management accountants to move from a
transaction and compliance orientation (as reflected in the 1981 definition) to that of a
strategic business partner—to be stewards of corporate performance management,
planning, and budgeting; champions of the corporate governance process, providing risk
management, internal control, and financial reporting at a time of great change; and
experts in cost management methods that help the organization become more
competitive and successful. Many definitions and descriptions used in practice today
regarding the role of the management accountant do not reflect the move to strategic
business partner that is underway.
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Technology & Innovation Management Technology & Innovation Managemen
Many definitions explain the role of the management accountant as an information
provider, one who gathers, summarize, analyses, and reports information to
management decision makers – a role that has largely been usurped by technology, e.g.,
highly integrated ERP systems.
Management accountants’ primary influence on the information value chain has shifted to
the conceptual design of the management accounting system embedded in an
organization’s technology backbone. The role of information provider can be presented in
the context of an organization’s information value chain. The traditional role of
management accountants as information providers is often described and interpreted as
being centered on the lower end of the value chain. The results of the research cited and
the move to strategic partnership indicate that the role of the management accountant
must be more diverse across this value chain, and it must include the very highest
level—participating in key strategic decisions as part of management decision-making
teams.
2. Goals of the Course
The specific objectives of the seminar are to enable you to develop an understanding of
and working competence in:
1. Analyzing the behavior of cost, revenue and profit in relation to its drivers.
2. Appreciating the purposes and design parameters of performance
measurement and reporting systems and their limitations in respect to
providing information to support decision making.
3. Applying a financial framework to the analysis of decisions with both short
and long term consequences.
4. Designing and implementing effective financial planning and reporting
systems that support operating and strategic decision making in an
organization.
5. Managing the behavioral, political and ethical aspects of designing and using
accounting information and decision making in an organization.
3. Lectures and material
Lectures:
The lectures will be given by:
- Dr. Alexander Brüggen
- Prof. dr. Bud Fennema CPA
- Prof. dr. Philip Vergauwen
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Technology & Innovation Management Technology & Innovation Managemen
Material:
Book:
Accounting for Decision Making and Control, 8th edition, 2013-2014
Zimmerman (Mc Graw-Hill) ISBN 9780071314756
Course overview:
Date Topic Lecturer
Day 1
Maastricht
Introduction – a holistic
view on Management
Accounting & Control
Prof. dr. Philip Vergauwen
Day 2
Florida
Review several areas of
managerial accounting
Prof. dr. Bud Fennema CPA
Day 3
Amsterdam
Performance measures,
capital budgeting
Prof. dr. Alexander Brüggen
September
28, 2015
Exam Management
Accounting (3 hours)
Note:
Day 1 – Maastricht:
The objective of this lecture is to briefly introduce the field of management accounting &
control and to give a recap overview of the basic “building blocks”. This overview will
focus on the need of auditors to capture and understand the basic MA&C tools and why
and how these tools are used in modern business. The MA&C framework is a stylized way
to capture essential business processes and to discuss the business’s performance and
potential to compete. In a way, the MA&C framework is the language of business
performance, appraisal and planning and – as such – it is a language that needs to be
understood by auditors when they assess the business’s internal and external reports on
performance, business risk and strategy implementation.
Day 2 – Florida:
The objective of this lecture is to review several areas of managerial accounting,
including (1) a discussion of the differences between managerial and financial accounting
and the examination of terminology used in managerial accounting, (2) the application of
joint costing including the physical units and net realizable value methods of allocating
joint costs to main products and by-products, (3) cost-volume-profit analysis used to
calculate metrics such as break even units and required selling prices, (4) the
preparation of variable (direct) costing income statements used to analyze business
decisions such as entry/exit decisions, (5) short-term decisions such as outsourcing,
special orders, product mix, and sell or process further decisions, and (6) short-term
budgeting used in planning, cost control, and employee motivation.
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Technology & Innovation Management Technology & Innovation Managemen
Day 3 – Amsterdam:
Performance measurement and capital budgeting are the topics of this day. The
measurement of performance is a crucial element of management accounting as it is a
pre-condition for good managerial control and decision-making. Different types of
performance measures, characteristics of ideal measurement, and how to deal with this
in a business context form part of this lecture. In addition, capital budgeting is discussed
as a specific area. Capital budgeting is particularly important in management accounting
as decisions in this area have usually large impacts on firm performance. Different forms
of investment appraisal, prediction models of investments, and the context of such
decisions in a principal-agent framework form the basis for this second part of the
lecture.
4. Examination
The course will be examined by a written exam of three hours. A minimum grade of a 6
on a scale of 1-10 is required in order to pass the exam. The grade of the exam will be
rounded to the nearest integer.
The exam is an open book exam, you are allowed to make use of:
- Book Accounting for decision making and control (Zimmerman)
- All notes and used presentations from Management Accounting & Control
Technology & Innovation Management Technology & Innovation Managemen
International
Executive Master of Auditing
Management, Organization,
Strategy and control
COURSE MANUAL
Cohort 2014
IEMA2014
All rights reserved. No part of this publication may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording or by any
information storage or retrieval system, without prior written permission from the copyright owner, or, as the cases may be, the publishers, beyond the exceptions provided by the Copyright Law.
2
Technology & Innovation Management Technology & Innovation Managemen
1. Introduction
For an auditor it is important to understand the organization that produces the financial
statements that are object of the audit (understanding the business). Therefor it’s highly relevant
to understand the basic concepts of human actors and their social interactions which are the basis
of creating and developing organizations .
In this course we focus on the way human actors organize themselves into groups with various
degrees of complexity to give you a better understanding of how organizations operate and will
develop. And we focus on the way organizations are managed and controlled . We highlight the
strategy process as a way to give direction to the operations of an organization. And last but not
least we describe the degree of control of processes and also elaborate on the illusion of control.
2. Goals of the Course
This course aims to provide students with an understanding of:
Developments in theories of the organization;
Decision making within organizations;
The strategy process and strategic planning;
Differences in process control;
Management style and techniques;
Marketing;
Operational audits, management of change and management consultancy .
Auditors audit the financial statements reflecting
the activities of the organization…
ABC B.V.
Amsterdam
Financial
Statements
2011
ABC B.V.
Amsterdam
Financial
Statements 2011
Financial
Accounting
Governance
and Control
Auditing
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Technology & Innovation Management Technology & Innovation Managemen
3. Lectures and material
Lectures:
The theory will be covered during the lectures. Students are encouraged to ask questions and
participate actively to discuss the topic at hand. There will be 8-10 hours of lectures. Several cases
will be discussed. The lectures will be given by prof. dr. Oscar van Leeuwen.
Material:
Students need to prepare the literature and make the case as requested. We use the following
book:
Understanding the Basic Dynamics of Organizing, Peverelli & Verduyn, Eburon
ISBN 978-9-059726864
4. Examination
Examination will take place by writing a paper. The paper has to deal with an organisation listed
on the AEX or NYSE. You have to write a short paper of 3-5 pages about the organisation you
selected in which you:
1. Describe the organisation using the framework of Peverelli & Verduyn;
2. Evaluate the strategy of the organisation you selected;
3. Describe the primary processes of the selected organization and one of the supporting process in
terms of the control-taxonomy.
The paper has to be handed in before November 15, 2014.
Please send your paper to Oscar van Leeuwen ([email protected]) and to Paul Kelder ([email protected]).
International
Executive Master of Auditing
TAX LAW
COURSE MANUAL
Cohort 2014
IEMA / MCT 2015
All rights reserved. No part of this publication may be reproduced or utilized in any
form or by any means, electronic or mechanical, including photocopying, recording
or by any information storage or retrieval system, without prior written permission
from the copyright owner, or, as the cases may be, the publishers, beyond the
exceptions provided by the Copyright Law.
1. Introduction
Tax law has an important influence on management decision making. Most intercompany
transactions have tax law aspects that need to be dealt with; also the financing of
companies may suffer from a large number of tax restrictions. Next to this, tax law has a
role to play in the area of human resources (wage taxes) and the delivery of goods and
services (VAT, transfer pricing). Being ‘in control’ of a company’s tax position is a crucial
part of accounting practice.
This course has been set up to give an introduction into selected elements of the Dutch
tax system that are of particular relevance to accountants. At the end of the course
special emphasis will be given to the operation of the Dutch corporate tax system in an
international environment (international tax planning).
2. Goals of the Course
The objectives of this course are twofold. First, students should obtain a feeling for
potential tax risk that they may encounter during day-to-day business. The second
objective is to get a basic understanding of how the Dutch tax system operates in order
to be able to make a link between accounting practices and (Dutch) tax law.
After completion of the course students should be able to signal when potential tax risks
may be at stake, in particular in a Dutch context, in order to be able to act as an
intermediary between a company’s accounting staff and its tax lawyer(s) in time.
3. Examination of the Course
There will be a written exam at the end of this course. In order to pass the exam a
minimum grade of 6.0 will be necessary for the exam.
The exam will consist of three questions, with several parts. These questions may apply
both to cases provided as well as theory. It will be open book, so you are allowed to take
any available literature with you with the provision that it is only English literature. In
order not to give any Dutch participants an advantage, the use of Dutch literature or
legal text will not be permitted.
See the Education and Examination Regulations 2015-2016 for more detailed information
on the examination.
4. Literature
This course has been set up in a way that the content can be studied by means of the
PPT-presentations used during the meetings. There is no need to study the assigned
literature in advance of a meeting, although we do recommend doing so.
There is limited literature available in English. The following may be used for reference:
• P. te Boekhorst, Netherlands – Corporate Taxation – IBFD Country Analysis,
updated 1 February 2015, downloadable PDF available via the IBFD website when
logged in to Maastricht University’s network (click here).
• M. Eerenstein, Netherlands – Individual Taxation – IBFD Country Analysis,
updated 1 January 2015, downloadable PDF available (click here).
• M. Gabriël, Netherlands – Value Added Tax – IBFD Country Analysis,
updated 1 October 2014, downloadable PDF available (click here).
In order to access these files you will first have log in to the Maastricht University
network and then open a webbrowser to http://online.ibfd.org/kbase/. Once this is done,
you can click on the link(s) above. Otherwise you may get an authorization error.
For VAT, the Te Boekhorst reference provides a concise overview at a level useful to
prepare for the meeting. Gabriël provides more details on each subject for further
reference after the meeting.
5. Lecturers
The course is coordinated by Prof. Dr Raymond Luja, professor of comparative tax law at
the Maastricht Centre for Taxation and the Faculty of Law and of counsel to Loyens &
Loeff N.V., Amsterdam.
Lectures will be given by various staff members of the Maastricht Centre for Taxation,
each with their own field of expertise:
Prof. Dr Ad van Doesum, professor of value added taxes and tax consultant
at PwC;
Dr Nadine Gorissen, assistant professor of administrative tax law;
Prof. Dr Hans van den Hurk, professor of corporate taxation and tax
strategist at Quantera Global;
Mrs. Heleen Moonen, lecturer in administrative tax law and deputy director
at the Dutch tax and customs administration, responsible for the handling
of foreign taxpayers (Belastingdienst Buitenland);
Dr Marcel Schaper, assistant professor of tax law;
Dr Marjon Weerepas, associate professor of income and wage tax law.
6. Preliminary Course overview
Session Theme Lecturer
Background
reading materials
(indicative)
29 September
2015 (morning)
Introduction to course
Corporate tax law (I)
Prof. Luja Te Boekhorst,
chapters 1.1, 1.2,
1.4.4, 1.4.5, 1.8,
1.10 and 11.2
29 September
2015 (afternoon)
Income taxation for
businesses – Tax base
and taxable profit
Dr Schaper Eerenstein,
chapter 1.4
Te Boekhorst,
chapters 1.3 – 1.9.4
6 October 2015
(morning)
Value added taxes Prof. Van Doesum Te Boekhorst,
chapter 13
Gabriël,
at a glance
9 December
2015 (morning)
Wage taxes Dr Weerepas +
guest lecturer
Eerenstein,
chapters 1.1.4, 1.2,
1.3, 1.10.3.1, 3,
7.1.1.2, 7.2, and
7.3.1.2
9 December
2015 (afternoon)
Corporate tax law (II) Prof. Luja Te Boekhorst,
chapters 0.4, 6.1., 8
and 9.2-9.5
10 December
2015 (all day)
International taxation
and corporate tax
planning
Prof. Van den
Hurk
Te Boekhorst,
chapters 7.1-7.3
and 10.2
11 December
2015 (afternoon)
Tax collection and
administration
Dr Gorissen and
Mrs. Moonen
Eerenstein,
chapter 1.11
Te Boekhorst,
chapter 1.11
8 January 2016 Written exam