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Increasing importance of corporate governance
Modern day corporate governance
Definition of corporate governance essay
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Abstract
This article defines the meaning of the corporate governance, its importance in the current scenario and also its benefits. As per the paper, Corporate Governance may be defined as
“Corporate governance loosely refers to the whole system of rights, processes and controls established internally and externally over the management of a business entity with the objective of protecting the interests of its stakeholders.”
After this, the article focuses on the relationship between the auditor and the corporate governance. It discusses the important role played by the auditor in a good corporate governance system. This article also focuses on the role of auditing committee in corporate governance and securing interest of shareholders and
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The article discusses the role and objective of auditor in corporate governance. It discusses and analysis the composition of the audit committee and also includes the recommonation of various committes. It also talks about the audit committee, its relation with the auditor and corporate governance. Moreover, before concluding the artcile the author discusses the “Governance in today’s Parlance” in which the author analysis the current parlance of the corporate governance in regards to legality and other compliance. The author has discussed the data of 2002 of the percentage of the companies having audit committee and also the number of independent directors required in a audit …show more content…
It demands the requirement of better rules and regulation. But even with all such rules and regulations being sanctioned, the chief work is still of the auditors of the company. They are the ones who should audit the financial thoroughly and ensure the shareholders and the other investors about the secureness of their investment and also to increment their confidence.
The shareholders of the company place very high trust on the auditor’s report, which shows the true and fair view of the accounts of the company. Hence the auditor should perform their duties with due diligence and vigilance to assure the stakeholders about the truth and fairness of the financial statements. It also helps in reducing the chances of fraud and improper accounting.
However, to achieve proper safeguarding and corporate governance, an independent auditor is required. Such auditor should not be related to the company or is directors in any way. He should not be a shareholder or be in debt of the company. Moreover such a auditor should fulfill all the criteria for appointing an auditor as per the Companies Act,
Considering the above mentioned auditor’s responsibilities, they seem vague. Current requirements are not sufficient to gain back the trust of public. The bankruptcies prove that the auditor...
Even though before this time period a company’s auditors were required to maintain an independent view since they were suppose to act as a protector to all end users it was not always the case. An environment was created with a Utilitarian approach that said company’s can offer package services that offer consulting services why at the same time audit the company’s financial statements. But when issue arose it became difficult to jeopardize the superior revenue that was obtained through consulting
Corporate Governance is the system by which firms are controlled and in essence directed, it includes several aspects and affects all aspects of a corporation. Governance is not one set of rules used to run corporations from around the world, just like the companies themselves there are several different types and each has its own benefits and determents. The principles-based form and the rule-based approach have very few similarities and several differences, the main one being the form of oversight. The rule-based approach is used in the United States and the principles-form is mostly used in other countries, the focus of this paper is to not only explain both approaches but also which is best.
This report gives the brief overview of the concept of corporate governance, its evolution and its significance in the corporate sector. The report highlights various key issues and concerns that are faced by the organizations while effectively implementing and promoting Corporate Governance.
But the stakeholders play a very important role in preventing and deterring fraud. Stakeholders includes customers, suppliers, employees, the community and the government. Each play an important role since they have an interest in the integrity of financial reports of the publicly-traded company. Employees have a vested interest in the company’s success and they have a responsibility to protect their interest. Their roles may start from the bottom but they are key players in the company. To help deter or prevent financial statement fraud, the employee must report financial reporting fraud if it is detected. This can be done by way of a vigorous whistleblower program of some other tip line provided by the company. The community and its members, including the news media, can play a regulator role by confirming that the company is a good citizen with fair business practices. Shareholders should make sure that any company in which they’d like to invest is in compliance with standards of oversight and ethics. Investors need to play and active role also. They should be actively involved by monitoring the companies in which they invest. They should attend shareholder’s meeting regularly to discuss concerns and check the books of the company. This will allow them to stay current with what is going on within the company. Shareholders should always remain vigilant and make
Bibliography: Turnbull, S. (1997). Corporate governance: its scope, concerns and theories. Corporate Governance: An International Review, 5 (4), pp. 180--205.
The oversight responsibilities of the board, the CAE lacking of expertise or broad understanding of financial controls and responsibilities, and the understaffed internal audit functions lacking of independence and direct access to the board of directors contributed to the absence of internal controls. To begin with, the board should be retrained to achieve financial literacy to review financial reporting. Other than attending formal meetings, the board of directors should be more involved with the management. For the Audit Committee, the two members who were recruited as acquaintances to Brennahan need be replaced with experts who are more sufficiently knowledgeable about accounting rules beyond merely “financially literate”. Furthermore, the internal audit functions need to expand with different expertise commensurate with the expanded activities of the organization, testing financial reporting rather than internal controls from an operational perspective. The CAE should be more independent and proactive to execute audit plans, instead of following orders from the CFO, and initiate a direct and efficient communication between internal audit and audit
Nottingham Trent University. (2013). Lecture 1 - An Introduction to Corporate Governance. Available: https://now.ntu.ac.uk/d2l/le/content/248250/viewContent/1053845/View. Last accessed 16th Dec 2013.
The fundamental duty of an external financial auditor is to form and express an opinion on whether the reporting entity’s financial statements are prepared in accordance with the relevant financial reporting framework. In discharging this duty, the auditor must exercise “reasonable skill, care and caution” (Lopes, J. in Kingston Cotton Mill Co 1896) as reflected in current legal and professional requirements.
The evolution of auditing is a complicated history that has always been changing through historical events. Auditing always changed to meet the needs of the business environment of that day. Auditing has been around since the beginning of human civilization, focusing mainly, at first, on finding efraud. As the United States grew, the business world grew, and auditing began to play more important roles. In the late 1800’s and early 1900’s, people began to invest money into large corporations. The Stock Market crash of 1929 and various scandals made auditors realize that their roles in society were very important. Scandals and stock market crashes made auditors aware of deficiencies in auditing, and the auditing community was always quick to fix those deficiencies. The auditors’ job became more difficult as the accounting principles changed, and became easier with the use of internal controls. These controls introduced the need for testing; not an in-depth detailed audit. Auditing jobs would have to change to meet the changing business world. The invention of computers impacted the auditors’ world by making their job at times easier and at times making their job more difficult. Finally, the auditors’ job of certifying and testing companies’ financial statements is the backbone of the business world.
The office of the Director of Corporate Enforcement (ODCE, 2015), Ireland defines Corporate Governance as “the system, principles and process by which organisations are directed and controlled. The principles underlying corporate governance are based on conducting the business with integrity and fairness, being transparent with regard to all transactions, making all the necessary disclosures and decisions and complying with all the laws of the land”. It is the system for protecting and advancing the shareholder’s interest by setting strategic direction for the firm and achieving them by electing and monitoring the capable management (Solomon, 2010). It is the process of protecting the stakes of various parties that have their interest attached with a company (Fernando, 2009). Corporate governance is the procedure through which the management of the company is achieving the goals of various stake holders (Becht, Macro, Patrick and Alisa,
Overall, the company is having ineffective controls regarding different departments and in the whole organization. An effective internal audit department should be established within the organization which should test the effectiveness of these controls on regular basis and make it sure that all controls are working effectively and efficiently with the different departments of the organization. Also the Internal auditor should implement the most effective processes and measures to prevent and detect the fraud, corruption and non compliance with the laws and regulations in the organization. Establishment of internal audit committee would be helpful in this regard which comprises of executive and non executive directors.
Audit is a process to evaluate and review the accounts and financial statement objectively. We can divide it into internal auditors and external auditors. Internal auditors have a inner knowledge of business process. Auditor has access to the much confidential information and all levels of management. But they may lose their judgement and they are not acceptable by the shareholder. “The overall objective of the external auditors is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to report on the financial statements in acco...
Corporate governance is the set of guidelines that determines the control and organization of a particular company. The company’s board of directors is in charge of approving and reviewing changes to this set of formally established guidelines. Companies have to keep in mind the interests of multiple stakeholders, parties who have an interest in the company. Some of these stakeholders include customers, shareholders, management, and suppliers. Corporate governance’s focus is concentrated on the rights and obligations of three stakeholder groups in particular: the board of directors, management, and shareholders. Corporate governance determines how power is split between these three stakeholders. A company’s board of directors is the main stakeholder that influences the corporate governance of a company (Corporate Governance).
Corporate governance is the policies, rules and regulations, by which a corporation shapes the way corporate officers, managers, and stakeholders perform their duties to create wealth for the entity. According to Lipman (2006), good corporate governance helps to prevent corporate scandals, fraud, and potential civil and criminal liability of the organization (p. 3). Most companies, whether formal or informal, have some type of corporate governance for the management to follow. Large companies will have a formal set of rules and regulations, while small companies frequently have spoken rules often due to lack time to form any type of formal policies. There is often no corporate governance with family owned companies.