Assessment task details and instructions

(a)  Introduction

The board of directors and corporate executives are in charge of ensuring that their companies are led in such a manner that adhere to good corporate governance (CG) practices. Given the numerous corporate frauds that have been reported in the past, the government has come up with a number of regulations that are aimed at punishing the executives whenever they defraud shareholders. For instance, the UK Corporate Governance Code and Sarbanes-Oxley Act are examples of such regulations. The regulations also require auditing firms to retain their independence in professional engagements. According to Holm and Laursen (2007), external auditors help in the implementation of the CG regulatory framework by reviewing the internal control environment and reporting any weaknesses to the shareholders. In addition, auditors are supposed to highlight material misstatements in financial statements arising due to errors or fraud and bring them to the attention of the shareholders. Currently, the auditors are required to review the internal controls over financial reporting in a company and form an opinion on the same in addition to the normal opinion on the financial statements. Further, external auditors could also review the corporate governance report of the Board and assess whether corporate governance principles are followed.

The implementation of the UK CG Code has been effective in preventing large scale audit or corporate failures since there has been minimal cases reported in the recent past. Whereas there are still concerns that a number of Britain’s largest listed companies are still failing to meet the CG requirements, increased surveillance by the government has helped companies improve their corporate governance practices. Improvement in internal control environment has been reported in a majority of the listed companies which will go a long way in minimizing the number of corporate frauds. However, further increased government surveillance is required to persuade all listed companies to comply with the code.

(b)  Requirements:

By referencing to auditing literature and professional standards, you are required to:

 

• Briefly evaluate current UK Corporate Governance (CG). (40%)
• Critically analyse whether UK CG is enough to protect stakeholders.(30%)
• Discuss who to blame when a collapse has happened: CG mechanisms or external (e.g., external auditors)?(30%)