Corporate Governance

Corporate governance gained momentum in the millennium when high-profile scandals began to surface in large corporations. The goal behind corporate governance is to improve the overall financial performance through the structure of economic standards based on the strategies of management.

Reliable top management is intertwined with corporate governance to establish and maintain financial integrity of an organization.

Board of directors, audit committee, and management are various corporate governance factors. The board of directors is expected to act on the behalf of the organization and not for personal gain. Within the board, the audit committee is formed. Much of the internal and external auditing is governed by this committee of board members. Management along with input from the board of directors establishes objectives and the strategies to provide accountability and integrity for the organization. Although the board members and management make several operating decisions together, it is important that the board members remain independent of management since part of the responsibility of the board members is to monitor the actions of management in regards to stockholders' interest. Therefore, based on the information above the selection of board members is extremely important.

Auditors rely on the factors of corporate governance to provide information in the auditing and financial reporting process. Auditors evaluate how effective the board monitors management and how well operations are accomplished at the current controls. Having solid corporate governance in place helps the auditor and the auditing process operate smoothly.

The core fiber behind corporate governance is monitoring the actions of management to ensure accountability and maintain financial stability. In the provided reading, management is referred to as the key source of corporate governance by auditors. Weak corporate governance can lead to potential fraud and scandals which can lead to the collapse of an organization which can lead to personal tragedies. The relationship between corporate governance and management should be described as one that works well together with insight and boundaries.

Corporate governance is not the only area getting attention after the news of scandalous activities in large corporations was revealed. Audit risk and materiality became