Preview

Role of Internal Auditor in Corporate Governance Framework

Best Essays
Open Document
Open Document
4662 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Role of Internal Auditor in Corporate Governance Framework
Contents Page 1.0. Introduction 2 2.0. Background 2 2.1. Objectives 3 2.2. Methodology 3 2.3. Layout 3 3.0. Literature Review 4 4.0. Theory 5 4.1. Internal Audit 5 4.2. Corporate Governance Framework 5 5.0. Case Studies 6 5.1. Royal Dutch Shell 6 5.2. Royal Bank of Scotland 6 6.0. Application of theory 7 6.1. Royal Dutch Shell 7 6.2. Royal Bank Of Scotland 7 8.0. Limitations 8 9.0. References 9

1.0. Introduction

A good governance system in an organization begins with having internal audit function. The value and the need to focus on improving strong corporate governance have increased due to a series of failure (bankruptcy and fraud) and financial scandals like earnings restatement to ensure financial reporting quality (Zeleke Belay, 2007). These corporate upheavals have driven external regulators to find ways of promoting greater accountability, disclosure and transparency. The main role of corporate governance is to restore the trust and market confidence as well; shareholders. (Carl Rosen, 2010)
It has been widely recognised that the role of the internal auditor becomes a continuing contributor in terms of developing good corporate governance practices and structure. It is said that an effective internal audit function enables the board to perform its corporate governance duties through organizational involvement, assessment, training, professional guidance and communication at all levels within the organization (Kenneth D’Silva, Jeffrey Ridley, 2007).
Audit committee, managers, internal auditors and external auditors play a critical role in effective control and appropriate leadership within the organization to act in the interest of the shareholders. (Sridhar Ramamoort, 2003). Most companies recognised and valued internal auditing and hence, the role of internal auditors has escalated and is being relied on to contribute significantly in business improvement, strategic and operation risks (Kenneth


References: Amanda Williams. 2012. Internal Audit. [ONLINE] Available at: http://www.accaglobal.com/content/dam/acca/global/PDF-students/2012s/sa_apr12_p1_audit.pdf. [Accessed 13 March 2013] Andrew R Barclay Simpson, 2013. RBS had 21 staff involved in Libor scandal. [ONLINE] Available at: http://www.barclaysimpson.com/news/rbs-had-21-staff-involved-in-libor-scandal-news-801537104. [Accessed 13 April 2013] BBC News Carl Rosen. 2010. Corporate Governance in the Wake of the Financial Crisis [ONLINE] Available at: http://www.unctad-docs.org/files/CG-in-Wake-of-Fin-Crisis-Ch5.pdf. [Accessed 13 April 2013] CFTC, Melissa Jürgen Common Dreams. 2004. Shell Report Exposes Lies on Oil Reserves. [ONLINE] Available at: http://www.commondreams.org/headlines04/0419-08.htm. [Accessed: 10 March 2013] Dallas, Lynne Dechow, P., Sloan, R. and Sweeney, A. (1995). ‘Detecting earnings management’ The Accounting Review, 70: 193-225. [Accessed 02 April 2013] Deloitte eHow.com. 2013. Role of Internal Auditing in Corporate Governance. [ONLINE] Available at: http://www.ehow.com/about_6614339_role-internal-auditing-corporate-governance.html. [Accessed: 02 March 2013] Ernst & Young - United Kingdom Grant, R. and M. Visconti. 2006. ‘The strategic background to corporate accounting scandals’, Long Range Planning 39, 361-83 Holt, Travis P Ionel Bostan, Veronica Grosu. 2010. The Role of Internal Audit in Optimization of Corporate Governance at the Groups of Companies. [ONLINE] Available at: http://store.ectap.ro/articole/444.pdf. [Accessed 13 April 2013] Jan Cattrysse Kenneth D’Silva, Jeffrey Ridley. 2007. Internal auditing’s international contribution to governance. [ONLINE] Available at: http://www.lsbu.ac.uk/bus-rafg/internal-auditing-governance.pdf. [Accessed 13 April 2013] Myfinances Reuters. 2013. UK in-house auditors face more scrutiny after Libor scandal. [ONLINE] Available at: http://in.reuters.com/article/2013/02/11/britain-banks-audits-libor-idINDEE91A09J20130211. [Accessed 15 April 2013] Risk Business Zeleke Belay. 2007. Internal Audit & Corporate Governance. [ONLINE] Available at: http://www.scribd.com/doc/2194671/Internal-Audit-Corporate-Governance. [Accessed 10 April 2013]
Continue Reading
View Writing Issues

You May Also Find These Documents Helpful

  • Good Essays

    Acc 544 Week 1
    • 668 Words
    • 3 Pages

    Acc 544 Week 1

    To understand how the addition of an internal auditor will help a business, the exact role and function of the internal auditor must be known. An internal auditor is an employee of a company that provides the organization with an independent assessment of the organization’s risk management and internal control. Additionally, the internal auditor ensures a company is in compliance with government regulations. This has been a point of emphasis in recent years with the passage of large-scale government regulations such as the Sarbanes-Oxley Act of 2002. Ultimately the findings and recommendations of the internal auditor seek to improve a company’s efficiencies and operations.…

    • 668 Words
    • 3 Pages
    Good Essays
    Read More
  • Better Essays

    HCA 545: Role Of Governance In Health Care Organizations
    • 1175 Words
    • 5 Pages

    HCA 545: Role Of Governance In Health Care Organizations

    The failure of the Enron Corporation in the late 2001, apart from signaling the largest corporate bankruptcy in the USA, has raised several questions about the effectiveness of the contemporary accounting, auditing, and corporate governance practices. The committee followed all the rules that were put in place by the board. “However, it is said that the audit committee deserves much of the blame for Enron’s collapse and the corporate governance movement deserves much of the blame for the Enron audit committee. Governance experts say the audit committee’s lack of independence made it less inclined to question management.” (Lavelle, 2002). Businesses collapsing, like Enron, can be prevented. “Those executives can be criminally penalized for misleading auditors. For a successful corporate governance, board members should be properly inducted, trained and developed. The pros and cons of different types of corporate governance need to be explored and best practice disseminated. There needs to be more company sponsored practical researcher on governance, rather than the black box it often is at present.” (Vinten,…

    • 1175 Words
    • 5 Pages
    Better Essays
    Read More
  • Better Essays

    Northern Rock Plc
    • 1975 Words
    • 8 Pages

    Northern Rock Plc

    4. Agha, M G and Qatinah, A. (). Lehman Brothers and Corporate Governance Failure. Available: http://www.slideshare.net/adnanqatinah1/lehman-brothers-case-study2. Last accessed 09 Feb 2013.…

    • 1975 Words
    • 8 Pages
    Better Essays
    Read More
  • Powerful Essays

    Chapter One
    • 5480 Words
    • 22 Pages

    Chapter One

    A large corporation with securities listed on a stock exchange is required by the rules of the stock exchange and by the rules of the Securities and Exchange Commission to provide an audit report with the annual financial statements furnished to its stockholders. It also is required to engage the auditors to provide an opinion on its internal control. Apart from legal requirements, however, a large listed corporation recognizes that it must maintain investor confidence in the reliability of its financial statements and internal control over financial reporting if it is to continue to be able to…

    • 5480 Words
    • 22 Pages
    Powerful Essays
    Read More
  • Powerful Essays

    Principal-Agent Problems Are Caused by Insufficient Oversight by Company Directors
    • 1183 Words
    • 5 Pages

    Principal-Agent Problems Are Caused by Insufficient Oversight by Company Directors

    Corporate Governance is a complex field that started to develop very quickly this last decade. The collapse of international firms, the financial crisis, the international scandals, the pressure from the governments and non-profit organizations… are all participating factors that make Corporate Governance an important concern of everyday business.…

    • 1183 Words
    • 5 Pages
    Powerful Essays
    Read More
  • Good Essays

    Auditing
    • 1422 Words
    • 6 Pages

    Auditing

    We conducted our audits in accordance with the standards of Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides reasonable basis for our opinion.…

    • 1422 Words
    • 6 Pages
    Good Essays
    Read More
  • Good Essays

    Recommendation Brief for an Internal Accountant
    • 713 Words
    • 3 Pages

    Recommendation Brief for an Internal Accountant

    An internal auditor would work with management and owners to analyze important areas of the company’s performance. These areas that would be analyzed would include assets, accuracy of financial information, and ensuring that government and industry standards and regulations are being followed. Another point that the internal auditor would confirm is that the policies and procedures are aligned with the company’s goals. An internal auditor would add security and be an asset to the company.…

    • 713 Words
    • 3 Pages
    Good Essays
    Read More
  • Satisfactory Essays

    Auditing
    • 637 Words
    • 3 Pages

    Auditing

    Since internal auditors report to the three main groups of the company, it is expected for conflict to arise; each entity is looking for the auditor to modify the findings to suit the entity’s needs. For example, operational management is concerned with consultative results pertaining to the operational efficiency and adequacy of internal control mechanisms. Likewise, the audit committee is concerned with the assurance results pertaining to risk and control. Lastly, senior management is concerned with both areas of assurance and consultative results. In addition, conflict will also arise if the “audit activities performed by the internal audit differ in importance as perceived by management and the audit committee”; said audit activities in question include, but not limited to, are compliance, risk, accounting and financial risk, assessment of internal controls, evaluation of operations, and review of ethics and code of conduct. Difficult interpersonal workplace problems won’t disappear by ignoring them; they’ll only get worse. Chronic conflict-avoiders will end up losing the respect of their employees – and their own management (Lipman, 2013)…

    • 637 Words
    • 3 Pages
    Satisfactory Essays
    Read More
  • Powerful Essays

    The New Audit Client Acceptance Decision 1

    • 3967 Words
    • 15 Pages

    The New Audit Client Acceptance Decision 1

    External auditing is essential to provide verification that the annual accounts by the firm provides a true and fair impression of the finances involved in the particular organization, ensuring that preparation of financial statements abide to the International Accounting Standards and other relevant accounting policies. The auditing is done by external auditors who are objective, independent and are knowledgeable to conduct an in-depth investigation to ensure that the financial statements are free from material forgeries and misstatements. External auditing is important as it ensures compliances, provides credibility, double checks internal audit and critique internal processes to enable improvement. (Jack, 2009)…

    • 3967 Words
    • 15 Pages
    Powerful Essays
    Read More
  • Good Essays

    Internal and External Auditing
    • 652 Words
    • 3 Pages

    Internal and External Auditing

    Internal audits is the control conducted by employees which involve helping businesses achieve their financial objectives which are aimed to identify how well risks are managed including whether the right processes are in place, or whether agreed procedures are followed, like class role calls. This process helps prevent the risk of unethical behaviour as it helps control the risk of accuracy and dishonesty, for instance, the purpose of a role call which is performed by a teacher (employee) to ensure that all students are in school today and those who are not. A business that doesn’t perform internal audits will likely have the case of fraud, theft, dishonesty, performance of accounting standards and accuracy being reported on financial reports for the position of a business. An example of a business that has committed unethical behaviour resulting in a $30 million net loss is ING because of a senior accountant who made 200 illegal transfers into her personal accounts, or directly to shops and real estate agents. By performing internal audits as a primary safeguard would prevent financial behaviour for ING.…

    • 652 Words
    • 3 Pages
    Good Essays
    Read More
  • Satisfactory Essays

    Audit Fee
    • 6626 Words
    • 27 Pages

    Audit Fee

    Felix, W., Gramling, A. and Maletta, M. (2001), “The contribution of internal audit as a…

    • 6626 Words
    • 27 Pages
    Satisfactory Essays
    Read More
  • Good Essays

    Role of an Audit Committee—Especially for a Public Company
    • 467 Words
    • 2 Pages

    Role of an Audit Committee—Especially for a Public Company

    Perhaps the most important function is that the audit committee diligently discharges its function to ensure the integrity of the issuer 's financial statements through perseverance, earnestness, attention to detail, and thoroughness. To do this, the audit committee should be proactive in analyzing information it receives from management and have a full understanding of the key accounting issues for that particular company (Hecht, 2002). Would the financial statements have been different if the independent auditor prepared them without any input from management? Do the financial statements furnish all of the information needed by existing and potential shareholders in order to be in a position to make an intelligent investment decision? Also, would the issuer have followed the same internal audit procedures if the partner in charge of the outside auditor were in fact the CEO (Hecht, 2002).…

    • 467 Words
    • 2 Pages
    Good Essays
    Read More
  • Powerful Essays

    Internal Audit
    • 15117 Words
    • 61 Pages

    Internal Audit

    Role of the internal auditor Explain the role of internal auditors in their organization, and compare it with the role of the organization’s external auditors. (Level 1)…

    • 15117 Words
    • 61 Pages
    Powerful Essays
    Read More
  • Powerful Essays

    Audit procedures
    • 5438 Words
    • 19 Pages

    Audit procedures

    2. K. H. Spencer Pickett (2010). The Internal Auditing Handbook. (John Wiley & Sons Ltd)…

    • 5438 Words
    • 19 Pages
    Powerful Essays
    Read More
  • Best Essays

    Promoting Good Governance in Public Institutions in Ghana, the Role of the Internal Auditor
    • 1871 Words
    • 8 Pages

    Promoting Good Governance in Public Institutions in Ghana, the Role of the Internal Auditor

    All over the world there is a realization that the Internal Audit activity has the potential to provide hitherto unparalleled services to management in the conduct of their duties. This potential has been turned into a challenge and embodied in the new definition of Internal Auditing from the Institute of Internal Auditors (the IIA).…

    • 1871 Words
    • 8 Pages
    Best Essays
    Read More

Related Topics