The service provided by internal auditors is especially valuable to larger companies that have complex internal controls. Internal auditors also provide additional support when company executives face difficult choices or when they must make difficult decisions regarding which areas of the business to focus on. In many instances, managers face the impossible task of determining what activities will strengthen the company’s finances and which will weaken its finances. Internal audits provide helpful guidance in this matter by alerting managers to potential deterioration in control.
Corporate governance continues to evolve in response to the complex challenges of our global economy. Recent changes in law, specifically the Sarbanes-Oxley Act, have helped to change the landscape of corporate governance. Because of these changes, many companies have stopped relying on internal auditors to conduct the vast majority of their assessments. Instead, companies are using external controls to monitor and report on the activities of senior management, including CEO, CFO, COO, and others. External auditors are qualified professionals who understand how to evaluate internal controls and can provide a comprehensive assessment of the risks facing the company. They can help to mitigate risks, identify opportunities for improvement, and help to ensure that the corporation meets its legal and ethical obligations.
The importance of internal audits can’t be overstated. Corporate governance experts agree that the most significant benefits come from thorough and timely audits. Internal and external audits conducted periodically help to ensure that management is taking actions that are in line with the strategies and business plans. They also help to ensure that key personnel and key processes are in place, and that the organization’s overall efficiency and effectiveness are at a high level. Internal and external audits can help to ensure that senior management takes the actions necessary to protect the health and future success of the business.
A major benefit of corporate governance is the prevention of corruption within the company. Many corporations allow their leaders to engage in personal activities that would not be allowed if the company had a stricter code of conduct. In addition, the best corporate governance practices provide a way to ensure that executives and other key employees take the highest level of care to ensure they are performing to the best of their ability. An organization’s top people know that the best way to retain their integrity is to be involved and follow the regulations governing the business.
By engaging in worthwhile projects and continuing to grow and expand the business, the bottom line will improve. This will result in increased profitability and market share for the company. The larger the company grows, the more likely it will need to attract investors to increase capital and take part in mergers and acquisitions. Without an effective succession plan, the survival rate for CEOs and other key management positions at companies is reduced. Investors may lose confidence in the company and the ability to raise funds for expansion or for return on their invested capital.
Corporate governance also ensures that the best possible outcomes are achieved for projects undertaken by management. When projects are managed properly, corporate risk is reduced and therefore the chance of poor results and financial losses are lessened. This leads to better utilization of the resources and better use of the investment returns. This allows the company to take advantage of new opportunities that might not have been available through more traditional means. Projects must also be monitored and directed towards achieving the best possible results for the organization. If a project is not being effectively managed, then the company should look at ways to get it back on track.
By implementing and maintaining good corporate governance practices, the overall success of a business can increase. Investments are made according to the returns realized from that investment. However, a company can only achieve its full potential if there is the best management of its resources. Good management must include the involvement of key individuals who can ensure that all goals are met for the company. In addition, this allows the company to expand into new areas and increase revenues.
