Role of External Auditors in Corporate Governance and Financial Reporting: Capital and Liquidity Requirements, and the Finance Theory

How can a mismatch of resources and abilities be addressed? Further, how can regulatory design involving the external auditor be targeted at incorporating regulation, monitoring and supervisory activities at minimal cost for those businesses and institutions involved? The Role of External Auditors in Corporate Governance and Financial Reporting not only recommends means whereby a variety of internal issues can be addressed but also considers various ways in which the external auditor and audit committees contribute to the process of corporate governance. Problems related to asymmetric information, information disclosure, transparency between corporate managers and shareholders, and factors contributing to insider trading are covered as well as the various ways in which the external auditor and audit committees can contribute towards enhancing corporate governance structures and measures. The impact of bank regulations, such as Basel III capital requirements, on risk taking and the need for a consideration of ownership structures are other issues which are examined. In acknowledging the issues raised by ownership structures, the book considers theories such as the banking theory and corporate governance theory. It also considers other alternatives whereby risk taking can be controlled, including developments which are contributory to the rise of Finance Theory. In recommending the external auditor’s expertise as appropriate for addressing agency problems whereby corporate managers, at the expense of shareholders, are compelled to act in their own interests, The Role of External Auditors in Corporate Governance and Financial Reporting, draws attention to the audit committee’s roles, presenting them as being both as a vital and complementary as corporate governance tools. It also highlights the importance of measures which need to be in place if the external auditor’s contribution to corporate governance is to be maximized.