The Fraud-Governance Linkage and Audit Research Paper

The Fraud-Governance Linkage and Audit - Research Paper Example Corporate governance also highlights the roles and responsibilities of stakeholders such as an organization’s management, the board of directors, shareholders, and other stakeholders. Corporate governance avails guidelines centering on the way in which corporations should be governed in order to attain its goals and objectives, as well risk monitoring and assessment and performance optimization (Carcillo, Hermanson and Ye 2). One of the outstanding themes of corporate governance revolves around the nature and extent of accountability required of persons running corporations, and mechanisms fashioned at decreasing principal-agent challenge to minimize managerial opportunism. Achieving Effective Corporate Governance Corporations operate in a legal environment and are subject to laws and regulations of a certain jurisdiction. Organizations also have a constitution that avails individual rules that govern the Corporation and sanction or constrain its operations or decision making. There are codes and guidelines that oversee corporate governance cover a broad array of categories. These include auditing, corporate responsibility and compliance, board and management structure, financial transparency and information disclosure. Corporations pursue and maintain an effective system that facilitates continuous enhancement in relation to strategy, performance, compliance, and accountability (Carcillo, Hermanson and Ye 3). Effective corporate governance can be achieved when the board of directors strictly embodies the interests of shareholders. In exercising their duty of trustees, the board of directors should review, challenge, and oversee the corporation’s business strategy and its effectiveness. Stakeholders should be well informed, engaged and willing to challenge each other. Parties involved in Corporate Governance The most prominent parties engaged in corporate governance incorporate government agencies and authorities, management (encompasses board of directors), Chief Executive Officer, shareholders, auditors, and other executives such as line managers, lenders, suppliers, employees, creditors, clients, and the community. Corporate governance mechanisms encompass systems of controls directed at aligning the interests of the managers with those of shareholders. The directors, employees, and management expect to draw benefits and reputation, as well as remuneration from the corporation, while the investors expect to draw financial returns from the Corporation. Lenders, on the other hand, expect specified interest payments, dividend distributions, or capital gains on their investment. The organization’s clients concern center on certainty in the provision of desired goods and services, which meet proper quality; the concerns of the suppliers revolve around compensation for their goods or services, and probable continuity in the trading relationship with the Corporation. The board is entrusted with playing a critical role in corporate governance. The board is mandated to endorse the corporation’s strategy as well as shaping a directional policy.