Objectives, Relevance, and Importance of Corporate Governance

This report discusses the objectives, relevance, and importance of corporate governance in ensuring efficient management and protecting the interests of shareholders and stakeholders. It also explores the circumstances where written representation is necessary and the matters commonly obtained through representation.

AUDIT AND ASSURANCE

TABLE OF CONTENTS
TABLE OF CONTENTS................................................................................................................2
INTRODUTION..............................................................................................................................1
MAIN BODY..................................................................................................................................1
Objectives, relevance and the importance of corporate governance...........................................1
Critical analysis of circumstance where written representation is necessary and the matters on
which representation is commonly obtained...............................................................................2
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4

INTRODUTION
Auditing refers to process involving evaluation of accounting entries recorded in financial
records and presented in the financial statements of company. Audit checks accuracy of financial
records of company Assurance on the other refers to process of analysing the method used in
assessment of the accounting entries and the financial records. Present report will discuss about
the relevance objectives and importance of the corporate governance. It will also discuss
circumstances where written representations are necessary. It will enhance the understanding of
auditing concepts
MAIN BODY
Objectives, relevance and the importance of corporate governance
It defines way in which corporate entity is required to be governed. CG describes the
corporate norms, values and the ethics. Corporate governance is described as system through
which companies are controlled and directed. It looks after matters such as board of directors,
directors responsibilities, audit committee and the relationship with external auditor. It ensures
that companies are running in interest of shareholders and wider community. It ensures that
board of directors are accountable for pursuit of the corporate objectives and corporation
complies with laws and obligations (Bhagat and Bolton, 2019). It ensures that the adequate
corporate strategies are crafted for futures of organisation.
Objective of corporate governance is to develop efficient and better management of the
business organisation. It ensures that there is defined structure for performing the task. In
accounting terms it ensures that all the accounting records are free from material misstatements
and financial statement reflects true and fair view of the organisation.
Corporate governance is relevant for protecting the interest of shareholders and
stakeholders of company. External auditors state finance of firm and attests to validity of the
financial reports published by the company. It is essential for building confidence among the
investors that financial statements have been audited and certified regarding the financial
performance and position of company.
Importance
Corporate governance is interaction between the various participants to shape
performance of company. It defines the ways to deal and make strategic decisions and
developing added value to stakeholder. It also ensures transparency between stakeholders and the
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company protecting and safeguarding the interest of all the shareholders. It is aimed at increasing
accountability of the company and uncertainties before they occur (Kieschnick and Moussawi,
2018). Corporate governance requires managers to create strong internal controls for ensuring
that the processes are being conducted in the manner defined. Controls enable the managers and
director to have effective monitoring over the processes. It ensures that the financial records are
created properly ensuring that all the transactions have been recorded. Through strong controls
they could identify the frauds or errors if any going within the organisation by verification of the
accounting records at timely intervals. Number of frauds, scams and the corrupt practices has
been incurred. Manipulating the accounting records for conducting frauds has become common
problem for companies. Corporate governance is essential for avoiding and identifying the frauds
and protecting the stakeholders.
Investor relations are essential part of the corporate governance as they directly rely over
the management of company for creating enhanced value on their investments. Organisation has
the obligation to ensure that timely issues of financial statements and the relevant disclosures that
could influence the decisions of investors are disclosed.
Hence, it could be said that corporate governance is very essential for the organisation to
ensure that the internal controls are working effectively and financial statements reflect true and
fair view of company.
Critical analysis of circumstance where written representation is necessary and the matters on
which representation is commonly obtained
Written representation is defined as statement provided by the management to auditor for
confirming certain matter for supporting audit evidence. It is letter by the outside auditor of
company and is signed by management of company. Written representation attests accuracy of
financial statements supplied by company to auditor and ensures that all information related to
financial statements have been disclosed to the auditor (Bhatt and Bhatt, 2017). It is
responsibility of the auditor to obtain written representation has to be obtained from the
management. Audit evidence is information used by auditor to arrive at conclusions on which
opinion of auditors is based.
The written representation are obtained in following circumstances such as fraud where it is
responsibility for design, maintenance and implementation of the internal controls for preventing
and detecting fraud and essential disclosures. It provides that financial statements could be
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materially misstated due to frauds. Suspected or identifies non compliance with the laws &
regulations are disclosed to auditor. It is also required that effects of the identified unadjusted
misstatements in aggregate or individually are not material (Khoshkhoosani, 2020).
Representation is also required for ensuring that effects of all the possible and actual claims and
litigations are considered in preparation of the financial statements as well as disclosures for
financial reporting frameworks.
Auditor having doubt over integrity, competence, diligence or the ethical values of
management auditor has to determine effect of the concerns over reliability of representations
and the audit evidence in general.
For example auditor carrying out audit of the financial statements has restrictions over some
areas of audit. If auditor believes that there may be transactions and events that could influence
the opinion to be based on financial statements (Written Representation. 2020). It is required to
obtain written representation from the management that the financial records are true and correct
to best of their knowledge and have provided all the information relevant for the purpose. Also,
auditor could seek for supporting documents where it is having doubt over some transactions of
the company.
CONCLUSION
It could be concluded from the above report that corporate governance has the objective of
marinating effective management within the organisation and ensuring that the interest of
stakeholders are safeguarded. Written representation has to be obtained by the auditors from
management regarding different areas that the financial information regarding those areas is true
and correct. They also ensure that the auditors are provided with sufficient audit evidence.
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REFERENCES
Books and Journals
Bhagat, S. and Bolton, B., 2019. Corporate governance and firm performance: The
sequel. Journal of Corporate Finance. 58. pp.142-168.
Kieschnick, R. and Moussawi, R., 2018. Firm age, corporate governance, and capital structure
choices. Journal of Corporate Finance. 48. pp.597-614.
Bhatt, P.R. and Bhatt, R.R., 2017. Corporate governance and firm performance in
Malaysia. Corporate Governance: The international journal of business in society.
Khoshkhoosani, P., 2020. Written Representation of Temporal Power in Safavid Material
Culture. Iranian Studies. pp.1-38.
Online
Written Representation. 2020. [Online]. Available through : <
https://www.accountingweb.com/aa/auditing/clarified-auditing-standards-written-
representations-part-1#:~:text=Written%20representations%20are%20required
%20about,provided%20and%20completeness%20of%20transactions. >.
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