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The Role of the Auditor in Corporate Governance

The Role of the Auditor in Corporate Governance he term “corporate governance” is commonly used in a context that implies a newly discovered remedy for all corporate ills. Precise definitions of corporate governance are hard to find, although general descriptions are many and varied. One that has appeal is: “Corporate governance is not, at its core, about power; it is about finding ways to ensure that decisions are made effectively” aohn Pound, “The promise of the governed corporation”, Harvard Business Review, March 1995). Others describe corporate governance as being a system of balancing entrepreneurialism with some form of monitoring. For this paper, I prefer the view that corporate governance is, in essence, about putting in place and maintaining an appropriate accountability system; management is accountable to the board for its actions and the board is accountable to the owners for its oversight of management. The auditor then provides an independent opinion on this accountability process through reporting on the financial information given to the owners, enabling them to assess the quality of the stewardship being exercised on their behalf. This view of governance suggests that, although an accountability system should be wide-ranging in its scope, the reporting role of the auditor is focused narrowly on financial http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Australian Accounting Review Wiley

The Role of the Auditor in Corporate Governance

Lynn, R.S.
Australian Accounting Review , Volume 6 (12) – Sep 1, 1996
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Publisher
Wiley
Copyright
© 1996 CPA Australia
ISSN
1035-6908
eISSN
1835-2561
DOI
10.1111/j.1835-2561.1996.tb00012.x
Publisher site
See Article on Publisher Site

Abstract

he term “corporate governance” is commonly used in a context that implies a newly discovered remedy for all corporate ills. Precise definitions of corporate governance are hard to find, although general descriptions are many and varied. One that has appeal is: “Corporate governance is not, at its core, about power; it is about finding ways to ensure that decisions are made effectively” aohn Pound, “The promise of the governed corporation”, Harvard Business Review, March 1995). Others describe corporate governance as being a system of balancing entrepreneurialism with some form of monitoring. For this paper, I prefer the view that corporate governance is, in essence, about putting in place and maintaining an appropriate accountability system; management is accountable to the board for its actions and the board is accountable to the owners for its oversight of management. The auditor then provides an independent opinion on this accountability process through reporting on the financial information given to the owners, enabling them to assess the quality of the stewardship being exercised on their behalf. This view of governance suggests that, although an accountability system should be wide-ranging in its scope, the reporting role of the auditor is focused narrowly on financial

Journal

Australian Accounting Review – Wiley

Published: Sep 1, 1996

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