Ethics and Governance

This document discusses the importance of ethics and governance in organizations and how they impact corporate responsibility. It explores the differences between legal and ethical compliance in corporate governance and the roles of the board of directors. The document also highlights the benefits of good governance and the role of internal auditing in fraud prevention.

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Ethics and Governance
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University name
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Date of submission

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INTRODUCTION
Student 1
Legal corporate governance compliance
Introduction
Is a combination of rules, regulations, laws and procedures by which organizations and
companies are operated. It’s also a set of statutory laws and regulations that provide a basis
through which organizations are run and managed effectively.
Corporate governance is defined as the means by which the rights of the company, the
shareholders and the stakeholders are ensured, to ensure that the parties act responsibly. Its
essence lies in the separation of roles between the decision makers and the people entrusting
decisions to third parties.
Corporate Governance objectives are good governance practices that deal with
transparency of information, ethics, control, monitoring and basic principles of the best form of
governance, its ultimate purpose is to ensure effective, entrepreneurial and prudent management
that can deliver the long-term success of the company or organization (Hass, Tarsalewska and
Zhan, 2016). It’s through corporate governance that companies are directed, run and controlled.
Boards of directors are responsible for the governance of their companies. The shareholders’ role

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in governance is to appoint the directors and the auditors and to satisfy themselves that an
appropriate governance structure is in place.
Student 2
Ethical corporate goernance compliance has greater impact social responsibility.
Ethical compliance has proven to have more impact because it has clearly laid out mechanisms
to restore confidence and has the ability to build trust. Secondly, legal corporate governance
compliance may lead to legal absolutism where there is an attempt to legislate morality by
substituting accountability for responsibility.
Rebuttal Student 1
Legal corporate governance has less impact on corporate responsibility
Although Corporate Governance should only be associated with highly effective
management structure, to some extent it is only effective if it produces continuous positive
results at all internal and external levels of the organization, which is essentially made up of
good performance in both legal corporate governance and ethical governance. While ethics is a
branch of moral values that govern people about what is right and acceptable in the society, legal
corporate governance involves a series of set statutory laws that help with the management
(Zhang, 2018). Although these laws are important, they do not have such great impact on
corporate governance as compared to ethical corporate governance compliance. Ethics are
different from legal laws because they indicate and specify on what is wrong and what is right.
For instance, ethics in an IT firm should be about what the society s opinion is on use of

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computers, social media access on third parties etc. Basically an organization will majorly
consider the ethical responsibilities more as compared to those that are legal.
The duties of the board of directors are stated which include setting the company’s
strategic objectives, providing the leadership to put them into effect, supervising the running and
management of the business and reporting to shareholders on their overseer.
Such legal laws as stated include:
How the board is formed and operated, it specifies on the procedures that are taken to form
the board, the qualifications of the board members and their roles ,it also clearly defines that the
board is prohibited in coming in between management and operating decisions and is only
allowed to focus on its supervisory activities, although there is no clear definition between
supervisory and operational decisions.
It also dictates the company’s rights and privileges ,the member’s rights and privileges are
also well defined. The expectations of the management and what is expected of the company
towards its shareholders and the society at large (Shi, Connelly and Hoskisson, 2017).Through
legal cooperate governance, constant reviews and assessment of the members of the board and
board committee is carried out, this is to ensure transparency and accountability of members of
the board.
Rebuttal Student 2

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Ethics allow us to reflect and above all, build and not destroy society in which we are in. It’s
important to establish good morals, for the good of an individual and for the structuring of the
company. Ethics in corporate governance allows us to respect the alues of the society, that are
constructed and reflected by their actions and practices from day to day in a company therefore
allowing transparency and good values.
It is necessary, in any relationship to establish, from the simplest to the most sophisticated
organizations, or emergence of parameters that govern organizations and respect between these
relationships. For example the shareholders and management should be guided by certain
regulations (Trevino and Nelson, 2016). However, this may not be possible if there are no ethics
to guide these relationships.
Ethics in Corporate governance have its own laws and methods that are applied. First, ethics is
to moral, an integral part or human behavior. “Basically, ethics are to regulate life in society so
that people subject themselves to coexist better (Yiu, Wan and Tian 2016). Corporate
governance acts on two ethical principles that, practically allows transparency in governance of
companies, establishing ties even in the business world. Therefore, there is correct dispersion of
information in the practice of corporate governance.
Ethics and corporate governance are concepts that complement mutually and one cannot do
without the other.The ethical principles are corporate governance and their Information
dissemination activities, Calling attention to problems relevant to these disclosures, for ethical
concepts and their precepts, does not concern the activities unfolded by corporate governance of
an entity (Wilbanks, Hermanson and Sharma, 2015). Accounting suggests that financial
statements should be published. For example Ethics dictates that accountants do not doctor

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financial statements even if they are pressured by the management. This is a common practice
that has led to collapse of major companies like Exxon where shareholders were led to believe
that the company is a going concern and yet they were doctoring the accounts. This goes against
the Principles in which you count on to professional ethics, still based on ethical principles
should not be subjected to such presses, by being aware of the function that they have in dealing
with that interfere in the company and in society.
Corporate governance dictates that there is need to be ethical, it deals with promoting structures
in management for purpose of strengthening relations established between companies and their
diverse public. Corporate governance ensures that there is a need to communicate and for all
stakeholders to understand how the corporate is working.
The evolution of the humanity has perfected and regulated rights and obligations to establish a
peaceful coexistence between people and communities. After Industrial Revolution companies
began a new moment in which required guidance on the work in order to adjust the relations
between entities.
According to (Halbouni, Obeid and Garbou,2016) "one can say that one of the effects of the
globalization is to adopt ethical and more stringent moral standards, which are required to
maintain a good image before of the public.
Most of the society coincides with the values of its inhabitants, making their goals adapted to
each other. Beyond the values of the society will be the values of business, of necessity, of
discovery, of innovation and personal initiative. The business, the how they stimulate the

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productivity and the distribution of goods by throughout society will define their own structure
and character of society.
Continuous assessment and control of possible threats and future losses enable the organization
to come up with suitable solutions to curb and tackle possible threats.
salary distribution of organization employees, current rules, rights and privileges and possible
changes of the set rules and regulations.
Conclusion
Although both ethical and legal governance is essential in the running and management
of the company, the legal system provides a great environment for a successful mitigation
between the company providers and users, it reduces organizational problems between firms thus
while it may not have such great impact as compared to ethical impacts,despite the fact that its
impact are also felt in the management level of an organisation and its roles.

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Corporate governance and need for ethical "being"
Corporate Governance is a management tool because it's in it. that all users of the company are
support to reduce the effects of informational asymmetry, attributing equal importance to the
interests of all parts of the organization. For Silva (2006, page 13), "the information is primordial
to support the decision-making processes and the performance of the organization. What is
fundamental is that there is harmony between the control of the company's operations and
accounting.
The concepts revolve around the monitoring and disclosure of the acts and company facts, and
means by which it defines for control and publication, ensure that those concerned by For
understanding that the parties definition is necessary and the types of governance, in terms of
shareholder and stakeholders. (Melé and Fontrodona, 2017) They are first defined by the
ownership of the entrepreneur and by the predominant form of financing of companies by
property- return. The second is committed to more broad, not limited to those of nature economic
and financial situation, not only the results, but also the consequences.
Corporate governance is how the drivers establish mechanisms for monitoring and control in
relation to administrators and make them according to the interests of the drivers. According to
(Melé and Fontrodona, 2017) it is argued that "the relationship between ownership is given
through the fiscal council, essential instruments for the exercise of control. Good governance
assures members equity, transparency, and responsibility for accountability and obedience to the
laws of the country.

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Corporate Governance in aligning strategies to solve compliance with ethics.
"We should all be ethical both in professional and family life, among other relationships in
society. What is nothing more than being honest, responsible person, always proceed in a which,
if you can not help, do not disturb. "Mankind would not have created civilizations without the
adoption of ethical and moral. Establishing that Corporate Governance should protect rights of
shareholders, treating them equally regardless of whether they are minority, majority, national or
foreigners; that the information must be available and transparent; disclosing relevant facts.
respect for information and by whom needs to be prioritized.
The management of information ethics and labor relations is one of the pillars of firmness. The
entities who yearn to have long life need to establish ethical relationships with all their
audiences (Sadasivam et al,2016). Reason why there is, among the parties, a contract
determining all the details, from the way of recollection the presentation of the information
stoned
Conclusion
Companies will have to learn how to equate the need to achieve profits, obey the laws, behave be
ethical and engage in some form of philanthropy towards communities in that they are inserted.

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The Benefits of Good Governance corporate governance are clearly recognized by the
participating companies, mainly in aspects related to improve transparency, improve
management, improve the image of the enable the alignment between the shareholders and
executives and facilitate access to the capital.
Corporate governance in this scenario presents itself as a tool of importance to the "agent",
where it uses the policies defined in quest to improve, manage and deliver to the shareholder the
return expected by its investment (Pullen and Rhodes, 2015). In this way, reduction of conflict
costs between administrators and owners of capital, so that there is more and more harmony in
this relationship.Therefore, shareholders or owners are delegating some or guidelines for one or
more of the following who will take the lead in decisions making .
In the past recent experience in private family members, shareholders were managers, confusing
in their ownership and management. With professionalization, privatization, globalization and
the remoteness of families, corporate governance put the Council between Ownership and
Management (Tan, Chapple and Walsh, 2017). There are several key expressions, linked to
principles, models, practices, regulatory mechanisms and for purposes of corporate governance,
being the main ones: Shareholders' law (shareholders); Right of other parties stakeholders;
Conflicts of agency; System of relations; System of Values; Government system; Structure of
power; Regulatory structure; and Standards of behavior.
PART B
Introduction

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Nowadays, companies are increasingly realizing that frauds are not exclusive to certain
entities or certain branches of business. They attack any kind of organization: Western or
Eastern; whether national or multinational; whether public, mixed or private; micro, small,
medium or large; whether professional or family; whether rural or urban; whether for profit or
not; whether of the productive area, the commercial area or the service area.
Today we live in a world that is culturally, economically and / or globally marketed, where
organizations face more local, regional or sector competition, but worldwide competition. In this
context, every effort that is effectively discharged, every cost-effectiveness realized in the
productive processes will make a great difference, but also is every mistake, failure, deviation,
loss and / or waste will be a burden that is increasingly heavy and difficult to bear.
Frauds cause, in addition to the high financial losses, other consequences for other
devastates. In the context of the work environment, they provoke a climate of insecurity and
distrust between the employees and their managers (Kaptein, 2017). Within the general direction
of the company, they cause suspicion and suspicion about the management capacity of its
managers. In the external scope, they smear the image of the organization with the consumer
public.
In Australia, frauds were almost never perceived due to inflation, rates which masked the
resulting financial losses, and also did not lead administrators to observe more closely the
problem. Losses due to errors and irregularities were incorporated into the costs of the operation
and passed on to the consumer. With the stabilization of the Australian currency, coming from
the Real Plan, this problem has become visible to most organizations.

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In this period, there were few companies that had internal auditors or had the concern of
contracting external auditing services. Thus, the following problem is presented: what is the role
of internal auditing in the prevention, identification and / or verification of fraud against
organizations? It is in this context and in response to this questioning that the main purpose of
this paper is to discuss the role of internal auditing as an organ of prevention, identification and /
or fraud investigation against organizations.
Cases
Frauds that have happened in the last five years
It is easy to convince investors or shareholders that a company on an expansion path is on
the right path. It is also not easy to think that a company that is expanding can be involved in
any financial fraud. In the last five years the two major fraud cases that have been reported are;
Banco Espirito Santo- This was at one time the biggest bank in Portugal with a market share of
20.5% in 2011 and a net asset of $80billion. Due to cooking of books the shareholders were led
to believe that the bank was still profitable and the expansion strategy was viable but in 2014 ,
auditors unearthed one of Portugal’s biggest scandals. They pointed out major anomalies in the
company’s income statement and the bank was forced to go into receivership and also received a
bailout of $4.4 billion.
The second scandal was uncovered in Australia’s giant retailer Dick Smith. This is a
perfect example that overexpansion can lead to the collapse of a business. In this case, the
collapse of this retail store meant that creditors would loose over $260million. According to
McGrathNicol, the administrators of this store, the collapse was caused by among other things;

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high cost of store network, the company had so many stores as compared to its competitors
which meant that the costs was high. Secondly,the change of market. This is because in the
consumer electronic market is very competitive and also a rapid change in consumer demand
patterns. Another reason for the collapse was expanding too fast that left little working capital
which meant that the retailer depended more on loans which increased costs.
Fraud prevention
Many business consultants reinforces the importance of fraud prevention through the use
of internal auditing in a globalized world, rather than the use of state-of-the-art technology, when
reporting the findings of other research on this subject :
Australian companies are increasingly adopting a preventive approach to prevent fraud - or, at
the very least, detect them at the outset (Fernando and Moore, 2015). This is one of the research
findings of Deloitte Touche. Of the 1,642 companies surveyed, 80% conduct internal audits. In a
similar survey, carried out last year, that figure was below 60%. Is it a business response to
increased fraud? None of this. "We have nothing to indicate increased fraud. This is a
consequence ofglobalization.
A concrete fact, which well proves the importance of Internal Audit in organizations, was the
case of the bankruptcy of Banco English Barings. If Top Management had listened to the
warnings of its Internal Audit, there would have been no irregular operations and, therefore,
would not have had the great financial loss, which led to bankruptcy a centenarian bank.

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Embezzlement and other forms of fraud and irregularities have been common to most
organizations. Although many reasons can be attributed to this situation, all these occurrences
seem to have one thing in common. The person or persons responsible for the irregularity
considers their interests as a factor isolated from the interests of the organization, and gives them
a higher priority. Internal audits provide a means of exposing such irregularities. The regular
performance of audits is even considered as a prevention device because of the risks of
exhibition.
However, one should note two important considerations on this topic (internal audit versus fraud
against organizations). First, one must not forget the inherent limitations of auditors, whether
internal or external, in relation to fraud, as was previously discussed in this paper. The auditor is
just a normal human being, not a paranormal or a fortune teller (Curti and Mihov, 2018). It does
not have an automatic and foolproof fraud detection detector. The second consideration, which
comes from the first, should not be forgotten that it is not the auditor's obligation to find out all
the company's fraud and that this is not his sole and only function or assignment within the
organization. In fact, this usually occurs in the normal routing of your jobs and tasks. Also, it
should not be forgotten that the internal auditor is an adviser to senior management in conducting
business and evaluating the company as a whole.

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CONCLUSION
Frauds nowadays assume innumerable and diverse forms, modalities and characteristics
inside and outside the organizations. They have become complex and sophisticated,
accompanying technological progress. They do not forgive anyone, attacking any kind of
entities. No company can claim that it is immune to its action.
With this sad reality, effective actions, measures and controls, which accompany the various
technological changes, are increasingly needed and can be quickly prevented and / or identified.
Among the various alternatives for prevention, identification and / or fraud detection, we
highlight the internal audit that, in addition to providing suggestions, analyzes, assessments and
information, related to the activities and reviewed, including recommending improvements and
implementing effective internal controls, becomes an important proactive instrument of internal
control, protection and security, serving the organization.
Finally, as shown, it is not enough to have only a few good internal controls. It is necessary is
always updating them and adapting them to reality. Prevention is a continuous and uninterrupted
work. Internal auditing, in this regard, plays an extremely important role in the permanent
evaluation of these internal controls within organizations; role in the prevention, identification

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and / or verification of fraud against organizations, as well as in the collection and selection of
evidence and evidence that can be presented against fraudsters, both in the civil (reparation of
damages) and in the criminal sphere.
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