Role of Directors and Auditors in Corporate Governance

ROLE OF DIRECTORS AND
AUDITORS IN CORPORATE
GOVERNANCE
Corporate Governance
Doing right things and doing them in the right way is the
essence of Corporate Governance Anonymous

Corporate governance refers to the relationship that exists
between the different participants and defining the intention

and implementation of a corporate firm.
The bodies like the CEO i.e. the management, the board of
directors, the shareholders and the auditors and audit

committee work together and mutually run an organization
for interest of all the stakeholders.
Board of Directors
A body of elected
or appointed members who jointly

oversee the activities of a company or organization.
In a stock corporation, the board is elected by the
shareholders and is the highest

management of the corporation.
In
authority
in
the
a non-stock corporation with no general voting

membership, the board is the supreme governing body of
the institution, its members are sometimes chosen by the
board itself.
Key roles of BODs

The role of the Board in creating an environment where a
corporation can succeed is the key to future success of the

business.
The board should work to ensure that it builds a united,
cohesive and coordinated team working towards the main

goal of attaining desired corporate performance.
There is need for greater control over corporate entities due
to the increasing concern about corporate failures and the

need for better monitoring.
The key roles of BODs in corporate governance are as follows:

a) Establish vision, mission and values1. Determine the company's vision and mission to guide and
set the pace for its current operations and future
development.
2.
Determine the values to be promoted throughout the

company. Determine and review company goals.
3.
Determine company policies.
b) Set strategy and structure1. Review and evaluate present and future opportunities,
threats and risks in the external environment and current and
future strengths, weaknesses and risks relating to the
company.
2.
Determine strategic options, select those to be pursued, and

decide the means to implement and support them.
3.
Determine the business strategies and plans that underpin

the corporate strategy.
4.
Ensure that the company's organizational structure and

capability are appropriate for implementing the chosen
strategies.
c) Delegate to management1. Delegate authority to management, and monitor and

evaluate the implementation of policies, strategies and
business plans.
2. Determine monitoring criteria to be used by the board.
3. Ensure that internal controls are effective.
4. Communicate with senior management.
d) Exercise accountability to shareholders and be

responsible to relevant stakeholders1. Ensure that communications both to and from shareholders
and relevant stakeholders are effective.
2. Understand
and take into account

shareholders and relevant stakeholders.
the
interests
of
3. Monitor relations with shareholders and relevant stakeholders
by gathering and evaluation of appropriate information.

4. Promote
the goodwill and support of shareholders and

relevant stakeholders.
e) Other roles1. Selecting, compensating, monitoring and, when necessary, replacing

key executives and overseeing succession planning.
2. Aligning key executive and board remuneration with the longer term
interests of the company and its shareholders.

3. Ensuring a formal and transparent board nomination and election
process.
4. Monitoring
and managing potential conflicts of interest of

management, board Members and shareholders, including misuse of
corporate assets and abuse in related party transactions.
5. Overseeing the process of disclosure and communications.

6. Monitoring the effectiveness of the companys governance practices
and making changes as needed.
Where does the auditor

fit in?
The auditor does not have direct corporate governance
responsibility but rather provides a check on the information

aspects of the governance system.
Board of directors
Internal auditor
Audit committee
Management
External auditor
Auditors Role in
Corporate Governance
Corporate
governance
involves
accountability, and monitoring.
decision
making,
1. Decisions require relevant and reliable information.

2. Accountability
involves
measuring,
reporting,
and
transparency.
3. Monitoring involves systems and feedback.
.Auditors primary role is to check whether the financial
information given to investors is reliable.
Objective of an audit
To express an expert opinion on the fairness with which
financial statements present, in all material respects, a

companys financial position, results of operations, and cash
flows.
To be able to express such an opinion, the auditor must
examine the financial statements and supporting records

using sound auditing techniques.
Role of audit committee

Oversight of companies financial reporting process .
To
recommend statutory auditor to Board, their

appointment, re-appointment, substitution or elimination,
terms and amount of audit fees , approval for payment for
any other services rendered by statutory auditors.
To review quarterly and annual financial statement with the
management before put forwarded

sanction.
to the board for
Contd.
To review the statement of uses/ application of funds rose
through any issue and IPO proceedings.

To review performance of statutory and internal auditor and
the adequacy of internal control system and function.

Discussion with the internal auditor and any momentous
conclusion and follow up there on and review finding of any

internal investigations by internal auditors where fraud and
irregularity is suspected.
Relationship between the Board

and the Auditors
To meet its obligations to shareholders, the board must
ensure that it receives relevant and reliable information.

Auditor assists the board in achieving that goal.
There must be open and frank dialogue between the
auditors and the board.

Auditors must express, to the board, their view on the
appropriateness not just the acceptability of the

accounting principles used or proposed to be used, and on
the transparency and completeness of the disclosures.
Relationship between the Audit

Committee and the Auditors
An effective audit committee is a vital component of an
effective corporate governance system.

The Audit Committee and the Auditors need to maintain an
ongoing dialogue independent of management and the rest

of the board
Conclusion
The role of the Board in creating an environment where a
corporation can succeed is the key to future success of the business.

It is incumbent upon the board to ensure that timely, accurate and
complete reports on all relevant aspects of the organization are
issued to all stakeholders.
The role of audit committee and auditors in current scenario has
become very crucial. If a company has an active and strong audit

committee then independent auditors working will be supported.
Auditing committee and auditor should perform their role diligently
and ethically to secure interest of not only company and investors
but all stakeholders.
This is possible when independent directors will have their own
weight and right to ask questions to management, which in turn will

give strength to auditor to be ethical.
Thank you

Role of Directors and Auditors in Corporate Governance

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Role of Directors and Auditors in Corporate Governance

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ROLE OF DIRECTORS AND

essence of Corporate Governance Anonymous

between the different participants and defining the intention

directors, the shareholders and the auditors and audit

or appointed members who jointly

In a stock corporation, the board is elected by the

shareholders and is the highest

a non-stock corporation with no general voting

Key roles of BODs

corporation can succeed is the key to future success of the

cohesive and coordinated team working towards the main

to the increasing concern about corporate failures and the

The key roles of BODs in corporate governance are as follows:

Determine the values to be promoted throughout the

Determine company policies.

Determine strategic options, select those to be pursued, and

Determine the business strategies and plans that underpin

Ensure that the company's organizational structure and

c) Delegate to management1. Delegate authority to management, and monitor and

d) Exercise accountability to shareholders and be

and take into account

3. Monitor relations with shareholders and relevant stakeholders

by gathering and evaluation of appropriate information.

the goodwill and support of shareholders and

e) Other roles1. Selecting, compensating, monitoring and, when necessary, replacing

interests of the company and its shareholders.

and managing potential conflicts of interest of

5. Overseeing the process of disclosure and communications.

and making changes as needed.

Where does the auditor

responsibility but rather provides a check on the information

1. Decisions require relevant and reliable information.

information given to investors is reliable.

financial statements present, in all material respects, a

examine the financial statements and supporting records

Role of audit committee

recommend statutory auditor to Board, their

To review quarterly and annual financial statement with the

management before put forwarded

to the board for

through any issue and IPO proceedings.

the adequacy of internal control system and function.

conclusion and follow up there on and review finding of any

Relationship between the Board

ensure that it receives relevant and reliable information.

auditors and the board.

appropriateness not just the acceptability of the

Relationship between the Audit

effective corporate governance system.

ongoing dialogue independent of management and the rest

corporation can succeed is the key to future success of the business.

become very crucial. If a company has an active and strong audit

weight and right to ask questions to management, which in turn will

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