What Is a Corporate Governance Audit?

Corporate governance audit refers to the conduct of internal audit institutions and personnel in accordance with national laws, regulations, policies and standards to independently, objectively monitor, evaluate and consult the corporate governance environment and status of the organization, and propose opinions or suggestions to improve corporate governance. In order to continuously highlight the importance of corporate governance, the internal audit department has to make corporate governance a priority audit object.

Corporate governance audit

The purpose of corporate governance audits is to help]

Corporate governance audits include shareholder-level corporate governance audits and board-level governance audits, including supervisor audits, independent audits, internal audits, and government audits. During the establishment and operation of the corporate governance supervision and restraint mechanism, the audit network becomes the basis of the supervision and restraint mechanism. Therefore, corporate governance must consider the role of auditing. Carry out governance audits, safeguard the interests of stakeholders, improve the company's management base, improve company credit, improve business management organization, and promote improved business performance.

The board of directors leads internal audit: internal audit has the functions of supervision, evaluation and control. Internal audit is more than just supervision; it also assists operators in strengthening control, improving management, and increasing operating efficiency. Establish an internal audit system under the leadership of the board of directors, establish a new audit trust relationship, and re-operate the operators through internal audit. "Responsibility for internal audit should be determined by consensus of the board of directors to enhance its independence" (

The board of directors directly commissions independent auditors to audit the financial reports provided by the operators,

The company systems represented by Germany, Japan, Austria, China, etc. require the establishment of a two-tier governance structure. These countries have different laws and regulations on the duties of the board of supervisors. Among them, the board of supervisors of the German AG is the most distinctive. The German AG has a board of supervisors and an executive board, but does not set up an audit committee. It is a two-tier vertical auxiliary organizational structure. The board of supervisors decides the candidates for the executive board. It is an audit model led by internal governance audits. The strength-driven paralegal audit model is completely different. The common feature of corporate governance audits in Germany, Japan and other countries is that governance audits include auditors 'audits and independent auditors' audits. In essence, there is a significant difference between German and Japanese corporate audits.

Japan and our country

Corporate governance audit evaluation internal and external governance reporting procedures

The governance reporting process should focus on the following issues: whether the governance report meets the reporting standards and definitions in the regulations; whether appropriate reporting standards have been established; whether the correct materiality intervals have been used in the reporting process; whether the reported violations are in the organization Appropriate levels were discovered, reported, and resolved.

The third and final part of the governance audit should focus on confirming and evaluating the existence of specific governance-related reporting procedures in the enterprise. When conducting an evaluation, internal audits should first identify and inventory reporting procedures related to governance, and then test the accuracy and adequacy of all internal and external governance reports. Effective governance reports must be as accurate and complete as financial reports to accommodate the increasing scrutiny of shareholders, regulators, and other members of the financial community.

In the future, companies will have to publish governance reports more frequently to align with new governance requirements. These reports must be subject to the same level of internal inspection and control as financial information before they are made publicly available to uncover potential risks related to the reputation of the organization. Internal audits therefore need to be accountable for governance reports to ensure the adequacy of monitoring and control related to this increasingly important area.

Reporting and tracking procedures for corporate governance audit evaluation governance matters

The reporting and tracking of governance issues should have the following characteristics: policy procedures stipulate the reporting and tracking of governance issues; the responsibilities for solving governance issues are clearly defined and communicated; the governance issues found can be traced back to the identification stage through the governance process; With the appropriate participation of senior management, governance matters are resolved in an effective and timely manner.

Enterprises with an effective governance environment will have appropriate procedures in place to identify, report and track governance-related matters. Due to the importance of this procedure, internal audits must carefully evaluate it. A related assessment should be able to give clear answers to four main questions: Are there appropriate procedures for reporting and tracking governance? If so, do these procedures effectively track governance matters? Do the data provided by these procedures help improve the identification and tracking of governance matters? Who is responsible for tracking governance matters? Another important aspect is to determine whether these governance matters can be effectively and thoroughly traced once they occur. If the company does not act quickly and thoroughly in accordance with the reports generated by the governance tracking process, then even if a reliable governance tracking process exists, it will not be good for the business. In assessing the adequacy of the escalation process, the internal auditor should be confident that the escalation process includes the audit committee and the board of directors.

Corporate governance audit evaluation governance changes and procedures

Governance change and learning processes should include the following: change and learning innovations are used to support the adoption of new governance or reform of existing processes; the importance of governance issues is strengthened through ongoing and training.

The real challenge facing management is that there is no single, consistent set of governance issues. In fact, new problems continue to emerge, and existing problems continue to evolve in unforeseen ways. As a result, innovative approaches to developing and implementing change and learning in governance are important to businesses. Similarly, evaluating the effectiveness of management of these innovative methods is also important to internal audit.

Internal audits should identify emerging or evolving governance issues, confirm that the organization has the appropriate specialized methods to identify these issues, and be confident that these innovative approaches will achieve their intended purpose. For example, perpetrators are constantly working to develop new and unforeseen ways of fraud. Therefore, it is necessary for the organization to develop a comprehensive anti-fraud system that goes beyond the scope of fraud awareness and emphasizes fraud prevention. In this context, organizations must develop a wide range of change management and learning support activities in order to effectively support anti-fraud procedures.

Corporate Governance Audit Evaluation Governance Support Software and Technology

Obviously, many organizations' governance processes and procedures will use a range of technologies and software tools to achieve their goals. The effectiveness of organizational governance activities depends to varying degrees on the appropriateness and reliability of its technical resources. In the past, companies did not prioritize investment in risk management and governance technologies, but in the current operating environment, access to real-time information has become critical, and the requirements for compliance with laws and regulations have accelerated, so technology has become an organization's effort to improve and measure its risk management And key drivers of governance. As the configuration is continuously upgraded, technology becomes the central nervous system of the organization, real-time determination that risks are managed, and actions are being implemented. The key to the effective functioning of various policies and measures is the integration with business processes, which is the essence of real-time risk and compliance management. Technology helps increase transparency, completeness and accountability by advancing the integration of various risk management, governance activities, information flows, performance and reporting.

Due to the importance of technology to organizational governance activities, internal audits should regularly check key technical resources to evaluate and confirm their adequacy and continued effectiveness. These inspections should identify all software and technology being used in governance activities and assess whether the controls related to that technology are appropriate. In the aftermath of Sarbanes-Oxley, many new technological measures related to governance will emerge, and organizations should rely on internal audit to assist them in assessing the effectiveness and control of these measures.

The revised IIA professional standards greatly emphasize the important role of governance activities in the internal audit function. At the same time, the new standard also provides new opportunities for internal audit departments to prove their true value to the company's stakeholders. To turn opportunities into capital, internal auditors must adopt a more proactive, clear, and proactive approach to auditing corporate governance. The above working procedures provide guidelines for internal audit governance activities that are most likely to create significant value for senior management, audit committees and shareholders. It enables internal audit to truly gain leadership in governance.