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    The Role of Auditors in Corporate Governance

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    Ram Kumar
    External auditors play a key role in corporate governance by ensuring that management acts in the shareholders' interests and the company has strong internal controls. Auditors must remain independent while overseeing management. Their main roles are issuing an audit opinion on the financial statements, evaluating internal controls, promoting accountability, representing shareholder interests, and assessing and mitigating risks. Corporate governance focuses on transparency and fairness, and external auditors are an important tool for achieving these objectives.

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    The Role of Auditors in Corporate Governance

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    Ram Kumar
    28 views2 pages
    External auditors play a key role in corporate governance by ensuring that management acts in the shareholders' interests and the company has strong internal controls. Auditors must remain independent while overseeing management. Their main roles are issuing an audit opinion on the financial statements, evaluating internal controls, promoting accountability, representing shareholder interests, and assessing and mitigating risks. Corporate governance focuses on transparency and fairness, and external auditors are an important tool for achieving these objectives.

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    External auditors play a key role in corporate governance by ensuring that management acts in the shareholders' interests and the company has strong internal controls. Auditors must remain independent while overseeing management. Their main roles are issuing an audit opinion on the financial statements, evaluating internal controls, promoting accountability, representing shareholder interests, and assessing and mitigating risks. Corporate governance focuses on transparency and fairness, and external auditors are an important tool for achieving these objectives.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    28 views2 pages

    The Role of Auditors in Corporate Governance

    Uploaded by

    Ram Kumar
    External auditors play a key role in corporate governance by ensuring that management acts in the shareholders' interests and the company has strong internal controls. Auditors must remain independent while overseeing management. Their main roles are issuing an audit opinion on the financial statements, evaluating internal controls, promoting accountability, representing shareholder interests, and assessing and mitigating risks. Corporate governance focuses on transparency and fairness, and external auditors are an important tool for achieving these objectives.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
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    The Role of Auditors and Corporate Governance

    External auditors play a key role in corporate governance framework, and they ensure that
    the board of directors and management are acting responsibly towards the shareholders'
    interest. The external auditors, by keeping objectivity, can add value to the shareholders
    and ensure that the company's internal control is solid and practical.

    The external auditor, as a pre-requisite, must be independent of the management yet has
    oversight of management and sometimes provides support to management on a different
    task. The roles of an external auditor in ensuring good corporate governance are as
    follows:

    • Issuance Of Audit Opinion: Basically, the statutory role of external auditors is to


    issue an audit opinion on the true and fair view of the financial statements for use
    by the shareholders and other stakeholders. Hence, the external audit is one of the
    cornerstones of corporate governance. It provides an external objective check on
    how the financial statements has been prepared and presented and a means
    through which shareholders monitor and control management, thus enhancing
    transparency in a company. It is therefore imperative to appoint an independent
    expert to audit the financial statements.
    • Evaluation of Internal Control: Internal control assessment is critical to the
    discharge of the auditor's duty. Such an opportunity will allow the auditor to
    understand the client's environment and help to decide on the appropriate audit
    plan to adopt. Auditors are expected to communicate any form of weakness to
    management via a Letter of weakness of internal control in accordance with ISA 400.
    • Accountability: Research has revealed that evaluating control and operation,
    which is a duty of external auditor, enhances corporate governance. External
    auditors introduce measures and policies that compel accountability. For instance, if
    the financial statements prepared by management is manipulated through inflation
    of figures, an external auditor could recommend penalties for such activities and
    provide recommendations to curb reoccurrence.
    • Representation of Shareholders Interest: One of the roles of an external auditor
    in corporate governance is to protect the interests of the company's shareholders.
    This is usually achieved through the independent report of the auditors, which are
    not influenced by the management. External auditors are required to state the
    organisation's finance position and performance, and attest to the validity of the
    financial reports.
    • Risk Assessment and Mitigation: External auditors help promote corporate
    governance by conducting a risk assessment. Risk assessment is usually performed
    to identify grey areas and review the mitigating measures that a company has in
    place against corporate fraud or corruption.
    In a bid to assess potential risk, auditors also analyse the overall risk tolerance of the
    company and the effort the company has made towards mitigating such risk.

    Conclusion
    Corporate governance focuses on promoting transparency and fairness within an
    organisation through performance monitoring and ensuring accountability. In that regard,
    external auditors serve as a primary tool and protector of corporate governance in any
    organisation.

    The role of an external auditor is crucial in achieving the objective of corporate governance.
    The external auditors are responsible for auditing the company's financial statement and
    providing reasonable assurance that they are presented fairly in conformity with the
    required standards. Auditors must also express opinions on the implementation and
    design of the internal control system, ensure credibility to financial reports, and reduce the
    risk that information disclosed in the financial statements is biased, misleading, inaccurate,
    incomplete, or materially misstated.

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