Limitations Of Corporate Governance

1634 Words7 Pages
1. INTRODUCTION Corporate governance, in general, refers to the set of mechanisms by which organizations are directed and governed, to ensure proper functioning of management and effective accountability to diverse stakeholders (Cadbury, 1992). It’s geared towards enhancing business prosperity and long-term shareholder value, whilst protecting the interest of other stakeholders (PSCG, 2012). Effective corporate governance would lead the directors and management to work towards achieving corporate goals and would promote effective control (OECD, 2004).

2. CORPORATE GOVERNANCE AND THE AUDITORS Corporate auditing is an important mechanism for providing assurance to the stakeholders regarding the stewardship of a company. The fundamental characteristics
…show more content…
It helps towards achieving corporate goals by bringing a systematic approach for the evaluation and improvement of risk management, control governance and compliance processes (Bunget et al., 2009). It discharges its responsibility by assuring the board and management of the adequacy, effectiveness and reliability of the internal control systems which allow the organization to manage risk more effectively (KPMG, 2004). By reviewing and evaluating the effectiveness of corporate controls, internal audit per se, serves as a crucial managerial control device, that is directly linked to the organizational structure and the common rules of the organization. Internal auditors, hence, form integral parts of an efficient corporate governance framework whereby their expertise in control contributes principally to the integrity and reliability of financial reports (Cai, 1997). It ensures integrity and accountability of management through regular review and evaluation of the organization’s code of conduct and their commitment to ethics (Drogalas et al., 2010). Corporate governance is upheld by internal audit through its role in aiding internal control system restructuring as well as in the management advisory (Onica, 2013). An effective internal audit function aids the board in discharging its governance…show more content…
Hence the scope of external audit is restricted to issues relevant to financial statements while the internal audit function encompasses not only financial but also operational and compliance issues. Nonetheless, the added credibility provided by an independent external audit function aided those relevant parties in their decision making taken on the basis of financial statements (Colbert,
Open Document