Reflections on Corporate Governance and the Role of the Internal Auditor

Abstract

The paper holds three main objectives. First to describe briefly what corporate governance is all about (what does it mean, where does it come from, how has it developed, etc ). Secondly to establish the relationship between corporate governance and internal control. And thirdly to reflect on the relationship between corporate governance and the internal auditor. Sooner or later every internal auditor is confronted with certain aspects of corporate governance. Perhaps the most difficult thing about corporate governance is to try to grasp its full meaning and its impact on the job of the internal auditor. Corporate governance means as lot of different things to a lot of different people depending on the context in which the term is used. For the internal auditor, corporate governance may just be a process aimed at contributing to the realization of the objectives of an organization, taking into account the expectations of all stakeholders involved and taking place within the boundaries of a number of hard and soft standards. Since it is the job of the internal auditor to help an organization to accomplish its objectives by bringing a systematic and disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes, the internal auditor has an important role in the corporate governance process. While traditionally the role of the internal auditor was to help the organization to maintain the system of internal control of its financial statements, a whole new range of new opportunities, possibilities and responsibilities present themselves in the wake of corporate governance. Moreover, corporate developments, along with more inquisitive stakeholders and assurance requirements, not only on financial but also on non-financial measurements and reporting, constantly increase the audit workload. In order to tackle these challenges, the internal auditor has to be resourceful in choosing the appropriate tool(s) from his toolbox to perform his task with care, prudence and dedication in order to provide the board with the reasonable assurance they expect. The fact that corporate governance encompasses so many different aspects, both hard and soft, indicates right away that perhaps not all these aspects can be measured that easily. While hard aspects largely coincide with aspects of compliance and are therefore easier to grade, soft aspects are often perceived in relation to internal and external customs, values and traditions.