The processes of investigation, attestation, and reporting relating to economic actions and events are all included in auditing. According to International Audit Standards, an auditor’s mandate require him to take note of and report on matters that come to his attention while carrying out his audit duties, including compliance with legal or regulatory requirements, the sufficiency of accounting and control systems, and the viability of economic activities, programs, and projects. When put together, the roles of auditors and that of good governance it is clear that , one is as a result of a variety of managerial tasks, while the other is limited to “economic actions and events”.
A discussion arise from this observation. Should external auditors operate outside of their operational parameters in order to achieve the desired level of improvement in the quality of governance?
Importantly and ultimately, the issue is how effectively auditors perform their tasks and if the Code of Corporate Governance is adequate and complete in ensuring that auditors play an effective role in auditing a company is important to assess.
Corporate governance, which involves decision-making, accountability, and monitoring, is the process by which company directors are controlled and monitored. These two elements of corporate governance that are seen as essential: first, is to ensure management accountability to shareholders and other stakeholders and second, to oversee and monitor management performance.
Seemingly, by appropriately applying accounting policies, external auditors can influence management’s incentives to take risks. and ensure that, where accounting policies are broken, the rules are appropriately enforced. The duties of the external auditor and the audit committee in corporate governance are essential complements in assisting with the desired outcomes of corporate governance.
The external audit influences financial reporting in a way that ensures that bases of measurement reflect the desired characteristics and attributes of accounting information by applying and incorporating appropriate measures and accounting policies.
