IntroductionBusinesses all around the world have realized the importance of the corporate governance and being ethical in their dealings especially after the bubble burst and the recent financial crisis. This has increased the importance of corporate governance and businesses look towards using different theories and models to ensure that they are ethical and have a code of conduct to follow. This makes it important that organizations working in the US look to develop and follow a code of conduct which ensures that the firm apart from being ethical follows a code which helps in proper corporate governance.
The value of corporate governance will enhance by involving external auditors but it is important that a code of conduct is provided for the external auditors and have a liability associated with it in case they don’t follow the code of practices which has been prescribed. This will help to fix responsibility and help the organization is conducting their daily operations easily. Objective of the reportTo identify the concepts and procedures governing corporate governance so that the applicability to business can be understood. To identify the role of external auditors and ensuring that a code of rule is developed for external auditor so that liability can be determined.
Corporate GovernanceCorporate governance ha gained relevance in the US and all the economies around the globe due to the different benefits that business look to have due to it. The importance of corporate governance is very high in the US after the bubble burst which made the economy slide into a downturn. The bubble burst affected the US economy and made the prices of houses to go down which has increased the importance of corporate governance (Ryuhei, 2009).
Corporate governance helps the business to look towards taking proper decisions so that the organizations look after the customers, employees, and community and share holders (Silva, 2004). This has made organization follow the different models and principles that governs corporate governance so that the business is able to conduct their daily affairs easily. Proper DisclosuresCorporate governance policies will help the business to ensure proper disclosures of the different transactions that the firm is involved into (Mitton, 2001).
This will help the customers, stakeholders, employees, customers, and others associated with the company to get a fair idea about the manner the company is performing. This will result in proper disclosure of material information which will have an effect on the decision making of investors. An example where the firm lacked proper disclosure can be seen in case of Enron where the company didn’t disclose all material information which finally led towards the collapse of Enron and the company had to file for bankruptcy (Austin, 2008). This results in denting the public confidence.
Also, the strict rules in the US governing corporate governance makes it important that businesses look towards concealing all material information so that the business is able to perform efficiently. Proper Monitoring & GovernanceUS have prescribed a code of conduct which firms operating in the US have to follow which transforms into better corporate governance. Organizations thereby have to ensure that all material information is disclosed as monitoring results in finding the minute details and if any material facts are concealed it could lead towards serious problems (Judd, 2010).