The perceived role of the external auditor in Corporate governance.
Abstract
There has been growing recognition in recent years of the importance of corporate governance
in ensuring sound financial reporting and deterring fraud. The audit serves as a monitoring
device and is thus part of the corporate governance mosaic. The objective of this research was
to examine the growing importance of the auditor in corporate governance. There is little
professional guidance on how auditors should consider issues on corporate governance when
formulating an appropriate audit strategy as there are no current specific auditing standards on
corporate governance and the auditor.
Data used for the research was collected by means of a semi-structured interview using
questionnaires with auditors on current audit practices in considering corporate governance in
the audit process. The research also sought the opinion of regulators and shareholders. Data
was analysed using content analysis and descriptive statistics.
Reflecting on client experiences, auditors indicate a range of views with regard to the elements
included in the rubric of "corporate governance". Most significantly, auditors view
management as the primary driver of corporate governance. The inclusion of top management
in the "corporate governance mosaic" is inconsistent with agency theory's prescription of the
board and other mechanisms serving as a means to independently oversee management's
actions to protect stakeholders. Auditors consider corporate governance factors to be especially
important in the client acceptance phase and in an international context.
The shareholders and regulators on the other hand regard inclusion of a paragraph on corporate
governance in the audit report to be an important contribution to corporate governance process.
This challenges the regulators of the auditing and accounting profession to re-Iook at the
contents and presentation of the auditor's repor
Sponsorhip
The University of NairobiPublisher
School of Business ( SOB )