Corporate Governance and A

uditing
Their Importance to Enterprises

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Introduction
Corporate governance is a hot topic now, owing to many popular
corporate failures. The downfall of giant corporations such
Parmalat in Italy and Enron in USA have brought the importance
of good corporate governance to the fore. This is also
exemplified from the demand for corporate legal services
related to corporate governance audits. While earlier, corporate
governance was thought of as a system that makes sure that an
enterprises manager does not exploit the business or the
shareholders wealth for private gains, it now has a much
broader meaning. Now, it is believed to be a system that makes
sure that resources are utilized most effectively in order to
benefit shareholders while meeting the expectations of society
at the same time. Enterprise risk management, CSR and strategy
audits for instance are important aspects of corporate
governance.
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Introduction

Audit reports on these aspects are of immense importance to

investors and analysts and they base their perception of the
enterprises accordingly. It is therefore essential to have strategic
corporate governance audits in place if an enterprise wishes to
survive the intricacies of the corporate world. Realizing this
importance, many companies seek external help from
corporate legal services to ensure they are on the right track.

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Basics of Corporate Governance

Corporate governance is defined in many ways. According to the
International Standard on Auditing (ISA) 260, it is defined as
communications of audit matters with those charged with
governance. It is the way in which an authority is practiced in a
corporate establishment for maximizing the usefulness of
corporate properties in order to hold the interest of shareholders
and to justify the stated core values of the organization. Ask any
corporate legal services provider and hell tell you that
corporate governance is more about promoting fair and
transparent administration of the corporation in order to meet its
objectives and for achieving control with the aim of fulfilling
strategic goals that not only satisfy financiers and investors, but
also customers, owners, suppliers and the society. Impartiality is
the key factor in any internal audit function. Corporate
governance is the responsibility of a companys board of
directors, audit committee and other supervisory committees
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depending
on the jurisdiction of the enterprise.
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Corporate Governance is not 100%

Fail Proof

It is impossible for any governance system, no matter how well

monitored, designed and implemented it is, to fully prevent the
exploitation of a company from the personal interests of some
dishonest and greedy authorities. However, fraud can be
prevented to a certain extent if strategic steps are taken to
improve corporate governance. Corporate legal services
usually come to the rescue in these matters.

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Corporate Governance Theories

A large number of theories have been proposed for best practice
in corporate governance. Of these, the stakeholder theory and
the shareholder theory are the most popular. The shareholder
theory was proposed by Milton Friedman. According to this
theory, the sole responsibility of an enterprise is to increase its
profits. This theory describes that the management is an agent
of the shareholders and that its aim is to run the company for
the benefit of these shareholders. Thus, the management is
morally as well as legally responsible for serving the interests of
the shareholders. While maintaining conformity to the basic
rules of the society, both those embodied in law and those
embodied in ethical custom, the company needs to make as
much money as possible. This theory however has its
disadvantages. It pressurizes the management to focus on
greater risk taking and short term strategy so they can increase
returns to the shareholders.
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Corporate Governance Theories

The downfall of Worldcomm and Enron are examples of how
focusing on the interests of shareholders alone can bring about
the downfall of thriving companies. Managers of these two
companies manipulated company accounts to show increased
returns to shareholders due to the pressure of keeping
shareholders satisfied.
According to the stakeholder theory proposed by Edward
Freeman, a business owes responsibility to stakeholders as well,
not just the shareholders. A stakeholder could be any person or a
group who will be affected by the actions of the business. These
include customers, employees, suppliers, the community and the
competitors as well. This theory is an important element of the
concept of CSR (Corporate Social Responsibility). In light of this
theory, companies have to take not only the legal and economic
aspects of their business but also the philanthropic and ethical
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aspects into consideration. On the flipside however, some
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Auditors and Key Players in

Corporate Governance
An auditors role is to check and make sure the financial
information given by companies to investors is correct and
reliable. He does not have direct responsibility of corporate
governance but rather monitors the information aspects of the
corporate governance system. Auditors could be external and
internal. A cost audit is performed to obtain credible data on cost
and
revenue
on
which
decisions
can
be
based.
Corporate legal services can
offer
valuable
inputs
to
companies on how they can manage their audit functions and
also perform them. Cost audits are a source of important
analytical information that can be used by the board of directors
to oversee the affairs of the company. Auditors are required to
provide their expert opinion on financial statements and all other
materials related to the financial position, cash flow and
operations of a company. They need to examine financial
statements and other company records using auditing tools.
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Auditors and Key Players in

Corporate Governance
The key players in corporate governance of a company include
the auditing groups, the management, secretaries, the
management team and other such parties. The responsibility of
the board of directors is however in a much broader sense than
the auditor. It has to focus on protecting the rights of key
stakeholders including the shareholders, customers, employees,
suppliers and the society. It sets up the strategic aims of the
company, leads and supervises its management.
Corporate legal services help companies with relevant
documents pertaining to these factors.

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Audit Responsibilities
In light of popular corporate governance failures, there have
been many proposals regarding the powers and responsibilities
of audit committees. The primary role of these committees is to
ensure smooth functioning of the directors who are within their
mandate and to check the data in financial records thoroughly.
They need to be able to explain the personnel structure used for
investigating the authenticity of the company operations.
Various strategy tools are used for internal and external auditing.
These include Environment Scanning PEST, TOWS, experience
curve, competitive analysis etc. for external audit and SWOT,
value chain analysis, strategic risk analysis, performance
analysis, financial models and portfolio models for internal
audits. Failure of accounting and corporate governance results in
immense costs for companies. The companies and their auditors
have to face widespread skepticism from stakeholders and the
community; they have to face litigations, etc. Such failures often
lead to the downfall of once thriving companies. Companies
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therefore
need to make sure their corporate governance audit
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Summary

Corporate governance is a hot topic now, owing to many popular

corporate failures. The downfall of giant corporations such
Parmalat in Italy and Enron in USA have brought the importance
of good corporate governance to the fore

http://www.accuprosys.com/corporate-legal-services
/

Accuprosys Best Corporate Legal Services Providers in India.

We will offer the services like Company Law Consultancy that
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