Statistical Techniques for Forensic Accounting: Understanding the Theory and Application of Data Analysis

3. Preventive Measures: Corporate Governance and Internal Controls

The problems we have cannot be solved by thinking the way we thought when we created them.

—Albert Einstein

3.1. Introduction

There is widespread public recognition, supported by substantive academic research, that corporate governance is essential to protecting shareholder interests and is critical to the sustainability of a firm. Many large business failures have been attributed to lax corporate governance within firms that were ineffective in preventing the downfall or informing various stakeholders on a timely basis. Corporate governance is often defined as the system and processes by which organizations are directed and controlled. It deals with the alignment of the interests ...