Chapter 2 Flashcards
Management responsibility are:
Choose which accounting principles best portray economic substance of company transaction
Implement system of internal control that assure completeness and accuracy in financial reporting
Ensure financial statements contain accurate and complete disclosure
They provide effective oversight through election of board members, approval of major initiatives like buying or selling stocks, annual report on management compensation from the board
Shareholders or stockholders
The major representative of stockholders to ensure that organization is run according to organization charter and that there is proper accountability
Board of directors
Role is same as the broad role of entire board of directors
Non executive or independent directors
Operations and accountability. Manage the organization effectively, provide accurate and timely reports to shareholders and other stakeholders
Management
Provide oversight of internal and external audit function and the process of preparing the annual financial statement as well as public reports on internal control
Audit committees of board of directors
It is a regulators that set accounting and auditing standards dictating underlying financial reporting and auditing concepts; set the expectation of audit quality and accounting quality
Board of accountancy
It is regulators that ensure the accuracy timeliness and fairness of public reporting of financial and other information for public companies
Securities and exchange commission
It performs audits of company financial statement to ensure that the statement are free of material misstatements including mistatements that may be due to fraud
External auditors
Perform audits of companies for compliance with company policies and laws to evaluate the efficiency of operation and periodic evaluation and test of controls
Internal auditors
The boards fundamental objective should be to
Build long term sustainable growth in shareholder value for corporation
Successful corporate governance depends upon
Successful management of the company, as management has the primary responsibility for creating a culture of performance with integrity ethical behavior
Effective corporate governance should be integrated with the companies
Business strategy and not view as simply a compliance obligation
Transparency is a critical element of effective corporate governance and companies should
Make regular efforts to ensure that they have sound disclosure policies and practices
Independence and objectivity are necessary attributes of board members: however companies must also
Strike right balance in appointment of independent and non-independent directors to ensure an appropriate range and mix of expertise diversity and knowledge on the board
Companies with effective corporate governance are less likely to
Experience fraud and are therefore less risky to audit.
Ineffective corporate governance increases fraud risk to an extend that at some point client is not auditable from risk mitigation standpoint
