1.

Building a strong, qualified board of directors and evaluating

performance. Boards should be comprised of directors who are
knowledgeable and have expertise relevant to the business and are qualified
and competent, and have strong ethics and integrity, diverse backgrounds
and skill sets, and sufficient time to commit to their duties.

EFFECT: The success of an organizations starts with the composition of its

major stakeholders and the integrity that it possesses which is always in need
in order to have a sound and efficient management of the business. Thus,
building a stiff foundation which regards to the composition of BODs and the
routinely evaluation of performance is highly important because these persons
are the ones who makes and implements business policies, and the
composure of the organization itself rest upon their decisions. Nevertheless,
the proper composition along with evaluation of performances creates a
domino effect to the rest of the organization.

2. Defining roles and responsibilities. Establish clear lines of accountability

among the Board, Chair, CEO, Executive Officers and management.

EFFECT: Proper delegation of tasks and responsibilities is one of the most

important things to be done in an organization, for it avoids any overriding of
duties or any conflict of interest. In addition, proper segregation of task can
lessen the possibility of an employee to commit errors or any fraudulent
activities.

3. Emphasize integrity and ethical dealing. Not only must directors declare
conflicts of interest and refrain from voting on matters in which they have an
interest, but a general culture of integrity in business dealing and of respect
and compliance with laws and policies without fear of recrimination is critical.
 EFFECT: A saying goes like, “One way lead to another”. Thus no matter how
a single mistake or sin a person could commit, knowing its materiality could
lead a person to commit another one thinking it’s just petty. In an organization,
it is very much important to inculcate in every single member, from executives
down to rank and file employees that the essence of knowing what is always
right should always be set forth and also they should know their ethical
responsibilities not just an employee but also as a member of the society. The
image of the organization does not only depends on how its product/services
offered to the public but it also reflects to the culture of the company most
especially on how the organization itself employs its strategies, policies, rules
and procedures.

4. Evaluate performance and make principled compensation decisions. Set

directors’ fees that will attract suitable candidates, but won’t create an
appearance of conflict in a director’s independence or discharge of her duties.
The organization should also need to establish measurable performance
targets for executive officers (including the CEO), regularly assess and
evaluate their performance against them and tie compensation to
performance. And lastly, establish a Compensation Committee comprised of
independent directors to develop and oversee executive compensation plans
(including equity-based ones like stock option plans).

EFFECT: Compensations is one of the major factors that can motivate an

employee to do their jobs. We all know that salaries of executives are much
higher than of middle managers and rank and files, so with regards to
compensating executive members of an organization, their salaries should be
proper, equitable and just. The entity should make sure that the salaries it
paid to its executives deserves them and that these members should prove
that they did work hard to earn it.
5. Engage in effective risk management. Companies should regularly identify
and assess the risks they face, including financial, operational, reputational,
environmental, industry-related, and legal risks.

EFFECT: Effective risk management gives comfort to shareholders,

customers, employees and society at large that a business is being effectively
managed and helps the company or organization confirm its compliance with
corporate governance requirements. This is relevant to all organizations large
or small. Thus, effective risk management practices support accountability,
performance measurement and reward and can enable efficiency at all levels
through the organization. Lastly, requires a detailed knowledge and
understanding of the organisation and the processes involved in the business.
 Assignment in AUDTG 422 (Internal Auditing)

“CAUSE AND EFFECT” RELATIONSHIPS RELATED TO CORPORATE

GOVERNANCE

Submitted by:

ANGELICA LLOYD C. MANAOIS

IV- BSAT

Submitted to:

JOHNVIR P. TORREON, CPA