Corporate Governance and Auditors

Topics: Audit, Corporate governance, Auditing Pages: 50 (14725 words) Published: October 29, 2010


There are a number of positive developments in the economy since the introduction of foreign currency (multi currency system), which if sustained, will spearhead economic recovery in the short to medium term horizon. These developments included the introduction of the multi currency system and the liberalization of the exchange control, the formation of government of national unity (GNU) and the engagement with multilateral institutions and the donor community.

This is already evidence of stability coupled with an increase in industrial capacity utilization since the adoption of multi currency in February 2009.stability is projected to spur growth in the financial, manufacturing and other sectors of the economy. However liquidity remains a challenge thereby lending and profitability, which impact on recapitalization of the economy.

The research is of the view that under the aforementioned scene, proper corporate governance structures are inevitable. There is need for improvement on the issues of corporate governance in all corners of the economy if real economic growth is to be realized. The research is also of the opinion that many companies collapsed over the past decade owing to partly serious corporate governance deficiencies, among other challenges. As a result, the research serves to highlight, hint and encourage all the relevant stakeholders to establish proper corporate governance structures in which the auditor is tasked to review and evaluate the effectiveness and efficient of the structures.

Corporate governance measures and other incentives are unveiled by the top-level management in various companies to create a platform for companies to transform from stability to growth. These measures are projected to consolidate the positive gains that are already emerging in the economy. Thus, for the corporate governance structures so established to be proper, effective and efficient, the research is of the view that an auditor has to be involved.

The researcher will make use of the following companies’ profiles as case study for the illustration of the inevitable role of the auditor in ensuring good corporate governance:

Enron –Texas-based energy trading company.
WorldCom-was a U.S telecommunications company that collapsed in 2002.The company faced a U.S$28 billion in loans and yet Bernie Ebbers who run the company was given a loan of U.S$366 million. Arthur Andersen was the auditor at that time. HIH insurance Ltd –The Company collapsed in March 2001, creating a loss of AUS$5.3 billion. Arthur Andersen was the auditor of the company at that time. One-Tel-was an Australian mobile telecommunications company. The company collapsed with AUS$2.4billion in debts and losses.  Arthur Andersen.


In Zimbabwe corporate failures brought the financial sector into crises in 2003 to 2004, a notable case being that of CFX which closed in December 2004[Zimbabwe Independent November 2005].

However the global financial fraternity is hard hit by serious scandals involving auditors. These accounting and auditing scandals of the recent years has called upon auditors to aim to improve their nature of services. Increasingly, the set up of appointing auditors to ensure good corporate governance is prone to spur conflicts between auditors and other concerned stakeholders. These conflicts of interest are a threat to the successful implementation of proper corporate governance structures. Therefore, the proposed corporate governance is prone to fail.

Nevertheless, the companies act proceeds to disqualify board of directors and management not adequate enough to manage the business. Though there might be conflicts between the auditor and other stakeholders, the Companies’ Act requires that an auditor be appointed to express an opinion on the truth and fairness of the financial statements of the public limited company. Various committees were and are still being...
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