Sustainable corporate governance and forensic accounting. Corporate governance is the system and structures of rules, practices, and processes by which a company is directed and controlled, the goals and objectives of the company are established, and the company’s performance is tracked.
Sustainable Corporate Governance And Forensic Accounting
Traditionally, corporate governance has focused on the owners of the corporation that have supplied the financial capital, regulation of the duties and responsibilities of the persons that the owners have selected as their agent to deploy their financial capital and generate a reasonable return on their investment, the control environment.
Which includes accounting procedures, internal controls and external audits used to track the operational activities of the company selected by the directors as the best means for delivering the anticipated return on investment to the shareholders; and transparency and disclosure, which are needed for the shareholders to fully understand how their financial capital has been used and to ensure that their agents, the directors and members of the executive team, have not abused their positions.
As time has gone by, corporate governance has emerged from what seemed to be an esoteric collection of laws, regulations, and contracts to recognition of its role as a primary driver of competitive advantage and profitability and a means for making and executing strategic decisions and ensuring that companies achieve their goals.
Importance Of Corporate Governance
The importance of corporate governance lies in its ability to craft refining laws, regulations, and contracts that govern companies. Corporate governance aims to safeguard the rights of a shareholder, stakeholders, and managers. It also aims to create a transparent environment wherein each party can assume its responsibilities and contribute to the corporation’s growth and value creation. Governance thus sets the tone for the organization, defining how power is exerted and how decisions are reached.
Sustainable corporate governance and fraud control activities are the two main pillars necessary for successful business growth and sustainability. Because of the organizational frauds, the recent past witnessed an intensifying concern for sustainability in corporate governance, and forensic accounting is the best-suited activity that can assist in eliminating frauds.
The term sustainable corporate governance can be defined as a system that is directed toward achieving a well-functioning board of directors, effective audit and risk committee, and beneficial nomination and compensation committee. The board of directors, audit, and risk and nomination and compensation committee are also described as the main constituents of corporate governance. These main constituents facilitate the policy approvals and decision-making process, which eventually leads to sustainable corporate governance.
Forensic accounting can be considered as an activity within an organization that is working toward controlling, eliminating, and mitigating frauds. Forensic accounting ensures that the decision-making process is free of fraud and is made by considering all the risk factors and within the approved risk appetite.
Organizations cannot sustain an environment that is not fraud-free; moreover, stakeholders’ satisfaction can impede if organizations cannot control fraud and fraud-related activities. In the current business environment, forensic accounting is the best choice available to eliminate fraud and, simultaneously, assist the board of directors, audit and risk committee, and nomination and compensation committee toward achieving sustainable corporate governance.
One of the responsibilities of governance management also includes eliminating and controlling fraud. To fulfill this responsibility, they require expertise that forensic accounting can only provide. This forensic accounting works with governance management and helps in creating sustainable corporate governance.
Sustainable corporate governance and fraud control activities are the two main pillars required for organizational successful business growth and business sustainability. Because of organizational frauds, the recent past has seen an increased concern for corporate governance sustainability, and forensic accounting is the best-suited activity that can assist in eliminating and mitigating frauds.