CHAPTER 5

CORPORATE GOVERNANCE, PROFESSIONAL LIABILITY, REGULATION AND OTHER CURRENT ISSUES

5.1 CORPORATE GOVERNANCE

Covering: Differing systems of corporate governance, the OECD Principles of Corporate Governance, the UK Corporate Governance Code, Audit committees.

Why do I need to read this section?

Students often avoid optional questions in this area. This is a shame because difficult questions are rarely set. It is understandable, though, because the terminology can be confusing and the area is sometimes poorly presented in study material. Many requirements in auditing standards assume an understanding of how corporate governance works and why it is important, including numerous requirements to report significant or unusual matters to the audit committee, for example. Students often simply forget to mention this because they do not really understand why it is important. These ISA requirements should make more sense in the context of the background provided by this section and help you gain the easy marks that are often available.

What is important in this section?

Auditing and assurance papers differ in the extent to which they examine corporate governance. Lower-level papers often cover it in considerably more detail than higher-level papers. Lower-level papers focus on details and the basic requirements for entities to have audit committees, for independent directors, and for auditors to communicate certain matters to them. Higher-level papers sometimes focus on the bigger ...

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