1. What is corporate governance?

Corporate governance is the system by which companies are directed and

controlled. Boards of directors are responsible for the governance of their
companies. The shareholders' role in governance is to appoint the directors and the
auditors and to satisfy themselves that an appropriate governance structure is in
place.

2. Who are the parties involved to achieve effective corporate governance?

The most influential parties involved in Corporate Governance include government
agencies, stock exchanges, management i.e. Board of Directors, CEO line
management Officers, shareholders auditors, lenders, suppliers, employees,
creditors, customers and the society at large.

3. Why is the accountancy profession partly to be blamed for recent corporate

failures?

A. The predominance of consulting income over auditing income inclines the auditor to
be more accommodating in order to use its auditing role as both a loss leader and a
portal of entry into the client in order to maximize more lucrative consulting income;
B. Reduced competition and the de facto oligopoly enjoyed by the Big Four may invite
the auditor to be less protective of its reputational capital, instead arguably treating it
as a 'wasting asset'; in essence, the auditor may today need less to excel and
establish its professional superiority at detecting fraud, and more to accommodate
issuer management - at least without becoming caught in a scandal that jeopardizes
its reputation for integrity;
C. Investors may care less today about audited financial information and rely more on
other protections and/or other gatekeepers (including securities analysts, credit
rating agencies, and activist hedge funds); at the same time, the pervasive use of
incentive equity compensation as the primary form of executive compensation may
cause the executives at issuers to press ever more aggressively for auditors to defer
to their earnings goals; and
D. In some cases (a minority, to be sure), audit firms or engagement partners at those
firms appear to have been complicit in fraud. These cases may represent instances
in which audit firms, having exhausted their reputational capital through involvement
in prior scandals, survive by deferring to management and exercising little or no
professional independence.

4. What is the role of the audit committee?

The primary role of audit committee is to provide oversight of the financial reporting process,
auditing procedure, selection of independent auditor and corporate internal controls system
and compliance with laws and regulations.

5. Describe the independence of the audit committee. How does this affect the auditor?

Audit committee ought to be separate from the employees of the company.  An independent
audit committee member should not be employed by, or providing any services to the
company beyond his or her duties as a committee member. The audit committee
independence is essential to prevent insiders from influencing the oversight role of the
committee

Effect of independence of audit committee on external auditors

The independence of the committee helps in preventing insiders from influencing the
performance of the external auditors.