Scholarly record

EXTERNAL AUDITORВ’S ROLE IN CORPORATE GOVERNANCE QUALITY AND REDUCING INFORMATION ASYMMETRY

D. DELIU

Abstract

“The focus on efficient corporate governance has expanded exponentially over the last two decades, corporate governance reform now becoming a key global issue. Not only do factors such as the increasing globalisation of financial markets, the growth in multinational corporations and regional economic developments motivate the need for good corporate governance, but the recent spate of large corporate collapses clearly signals the urgency for significant improvements not only in corporate accountability, but also in the quality of audit reporting. The chosen topic for this paper finds its correspondent in the challenges and perspectives of the corporate governance quality – information asymmetry relationship, with a particular emphasis on the factors that influence the relationship of interdependence between effective corporate governance, information asymmetry and the (proactive!) role of the financial auditor. Thus, the undertaken scientific approach is an extra piece of play in the so difficult "puzzle" game of defining the concept of efficient corporate governance, namely the assessment of the opportunity of convergence of corporate governance systems, the necessity of such a universal model of corporate governance, given that in the specialty literature the theory pervades between the imminence of convergence and the presentation of its insurmountable impediments. On the other hand, this research aims to bring added value to the multitude of already existing research on the interdependence between good corporate governance and the quality of audit through a series of inputs. The evolution of corporate ownership structure, in particular the resolution of asymmetric information among shareholders and other stakeholders, such as managers and creditors requires very complex research. In this context, informational asymmetry determines the need for an external intermediary, ie the independent auditor, to verify and provide assurance on the financial reports prepared by the management. The study was built by using qualitative research methods. The decision to use qualitative methods at the expense of quantitative ones is because the latter would not provide an analysis and a review of the evolution of corporate governance principles and the scope of financial audit over time. Above all, we want to provide an understanding through a depth analysis on the interaction between the quality of the audit, the role of the financial auditor and what means (or should mean!) effective corporate governance – in the context of information asymmetry. Based on our research, we have concluded that the audit needs to evolve and expand to add value to users. Especially for quoted companies, it must be more than an opinion on historical financial statements. We believe, therefore, that auditors should be involved in issues such as the effectiveness of corporate governance, the assumptions on which an organization's business model is based and its risk management.”

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