Corporate Governance and Auditor

Corporate Governance Explain how external auditing helps ensure good corporate leadership Corporate leadership is simply the processes and policies via which a firm manages its traditions, finances and institutions. Corporate leadership is important as it enhances workplace honesty and impartiality in firms and organizations. It achieves this via thorough output monitoring and enforcement of accountability in all sectors. One of the most important specialists which strengthen the resolve of corporate leaders in following good governance habits is an external auditor.

An external auditor's main function is to ensure the firm's shareholders do not suffer any unnecessary losses. As an external auditor has no affiliation with the company, this objective is easily met. Determining the health of a firm's finances and the accuracy of previous financial statements are also functions of an external auditor. An audit gives the shareholders rest of mind over the firm's true condition and sometimes, they ask for the auditor's opinion about the financial process applied within the firm (Keith, (2017).

So as to foster accountability, external auditors might suggest new processes and steps which should be adopted by the firm. An example of this could be suggesting proper punishment measures for workers found guilty of modifying financial numbers and artificially increasing cost. These crop of workers should be demoted or outright laid off or could lose their benefits such as pensions and bonuses. Another way good corporate governance is enhanced by external auditors is by carrying out period risk examination.

The auditors check the firm's safeguards against business fraud or unethical acts, also, the level of risk that can be managed by the company and the effectiveness of their efforts in reducing this risk are also examined by them. Finally, the external auditors have the function of creating ingenious and effective crisis management processes for the firm which would be applied whenever they are accused of dishonesty and unethical acts.

In most cases, assigning of duties to a number of top executives is always one of the first steps in this situation. Whatever the situation is, the firm's leadership must have a go-to framework which they apply to retain the public confidence in them among their investors and customers. (Keith, 2017). 2. How did accounting as a profession fluff its lines ahead of the signing into law of the Sarbanes-Oxley Act of 2002? In 2002, President George Bush signed the Sarbanes-Oxley act into law.

This need for this law arose in the aftermath of the shameful accounting-related events in companies like Enron, Tyco international and WorldCom among others (Ference, 2014) and it was developed as a basic yardstick for financial firms and the general public to prevent loss of trust in the American companies. Just before this became law, several accountants were found guilty of unethical and substandard acts. Some of these were embezzlement, modification of numbers, fraud and corruption. These acts cause many US public citizens to lose their savings.

Equally, workers in other corporate sectors which work together- with the accounting sector noticed these dishonest acts but didn't report them in causing a negative stereotype of CPA. CPA guidelines clearly state that fellow accountants or auditors should not hesitate in reporting cases or rumors of unethical acts (Ference, 2014) 3.

How do people interpret the term 'public watchdog' with regards to the functions of an external auditor? External auditors are called public watchdogs as it is widely believed that these set of people have the task of revealing signs of unethical conduct or other dangerous acts that could affect the savings of the public. Some of the possible acts are shady actions or poor monitoring of employee activities. External audits are expected to help clients understand the associated risks with dealing with a firm.

If the client is in danger of suffering losses of funds via theft or corruption among others, it is the job of the external auditor to make this known (ICAEW.com, 2011). Several sectors of an organization could be the drivers of the unethical actions such as the workers, the executives or groups within the firm Even though an external auditor is not expected to entertain fear in blowing the whistle on any illegal activities, it is advisable that they exercise caution so that they do not become victims of attacks.

They should have proper understanding of the means by which frauds occur. An example is the diversion of funds via unchecked financial records or giving too much financial control to a person. Another instance is allowing business funds to be used for personal needs. External auditors have the function of reducing the dangers common in the sector of financial handling which fraudulent persons can take advantage of such as poor leadership direction, unequal function distribution or even lack of vacations for major finance officials (Morrissey, 2000).

With time, a mutual respect develops between clients and auditor and this could cause a reduction in fairness. Auditors should strive to remain professional and ethical despite this and should make being honest in all their dealings their watchword. Auditors should be able to report all forms of illegal and dangerous activities. When they believe a firm's financial framework has holes, it shouldn't be difficult for them to bring the attention of the executives to these problems.

Correcting problems in the area of organization could pose a unique set of problems and thus it is important to keep at it until headway is achieved. 4. a) What steps would an auditor take in checking if a firm's ethical guidelines are being followed? The specialist who ascertains that the desires of employers, workers, a firm, a financial house, clients, the government and the financial landscape as a whole are met and worked towards is known as an auditor.

Their function is to keep up the good reputation and impartiality associated with accountants. A method an external auditor can use in determining if a firm's financial code of conduct is obeyed is by checking if the financial officials and the guidelines they establish foster integrity and fairness. These guidelines have to follow the relevant laws particularly in the areas of financial records preservation and the drafting of financial documents.

If the reverse is the case, it could indicate an infringement on the firm's ethical code which could have regulatory and judicial consequences (ICAEW.com, 2011). Every firm with an executive body which follows its financial ethical codes to the letter should possess integrity and openness in its business transactions. It will also have impressive history of financial dealings i.e. there will be no recorded history of unethical activities or shady deals in its financial documents.

In times of challenges and misplaced priorities, a firm's financial workers must foster effective communication and display a readiness to go along with the legal requirements. Furthermore, they must show readiness to release all details of dealings and business relationships which played a part in the existing crisis (Williamson & Hobbs 2013). For situations where traces of policy and ethical conduct infringements are rampant, financial workers should make proactive efforts towards revealing all knowledge on dealings and events which could cause the company and its finances to lose credibility.

A truly straightforward company must have a platform where its workers can make reports of unethical conduct to the government and firms which do not have this or who holds back and penalizes workers who make such actions should be branded as dishonest. An upright firm would desist from all forms of actions which aim at misdirecting, forcing, deceiving or illegally persuading external auditors from carrying out a proper and thorough work, rather, it should even offer to provide all necessary information for an even more thorough analysis and examination.

These firms should equally have no problems with providing documents and file which are sent to regulatory offices and government facilities (Williamson & Hobbs 2013). b. What will be the specific information an auditor will focus on to back up his/her claim of financial transparency of a firm? First, an in-depth analysis of the dangers a firm could suffer.