Assessment 3: Theoretical Concept

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Assessment 3: Theoretical Concept

Accountants and auditor’s responsibilities and contribution towards corporate governance: A case study of Wesfarmers


Different stakeholders have different roles and responsibilities in corporate governance. However, since 1980s a lot of focus has been placed on roles of board of directors. However, corporate have faced challenges in defining the roles of other stakeholders such as the management, accountants, and auditors as a way of fostering social and economic performance. Corporate governance involves many decisions which has to be made by different stakeholders. To avoid any overlapping of roles and responsibilities between the management, accountant, auditors, and directors, their roles and responsibilities should be defined clearly (ADELOPO, 2010, p. 89). Auditing committees and boards are concerned with how independent are the roles of auditors and accountants in corporate governance. It should be noted that auditors have been blamed for financial scandals, and fund embezzlement in companies in the past (Răzvan, et al., 2014, p. 1034).

Concerned with the conflict of interest between the directors, auditors, accountants, and management while executing their mandates in corporate governance, several studies have been conducted globally. This paper analyses four recent studies that have been conducted on the roles and responsibilities of accountant and auditors in corporate governance. The analyses addresses issues such as findings, managerial implication, and limitations. Assessment 3: Theoretical Concept


Brief summary of the theory and progression

A study on the roles of accountants and auditors in Corporate Governance conducted by Akinola, A. O in Nigeria in 2013. The study was based on how mismanagement of resources and funds in Nigeria Corporates had impacted the corporate and political life of the countries in the last forty years. The accountants and auditors have had no other choice but to act independently to promote a culture of good governance. The author believes that the accounting profession plays a crucial roles in achieving a probity and accountability in the corporate world. A link between accountants and internal and external auditors should be established with guidance of the audit committee in establishing effective corporate governance (Akinola, 2013, p. 27).

In 2017, Hay, D., Stewart, J. & Redmayne, N. B., conducted a study on the Role of Auditing in Corporate Governance in Australia. The study specifically addressed the growth of corporate governance in Australia, New Zealand and the rest of the world, as well as the roles, played auditors in corporate governance. The paper is based on analyzing the existing correlation between auditing and  corporate governance and their impact of corporations today (Hay, et al., 2017, p. 42). The study’s conclusion comes from an extensive analyses of the previous studies

Another study on the topic was conducted in 2017 by Joksimović, M. & Ahmed, A. The study addressed the internal audit as function to the corporate governance. In addressing the role of auditors in corporate governance, the authors based on the study on the agency and stakeholders’ theories by focussing more on the existing agency cost and conflicts that exist between the principals and the agents (Joksimović & Ahmed, 2017, p. 110). The auditors are supposed to check and prevent malpractices and fund embezzlement in corporations. The study established that the roles of auditors in corporate governance should be based on the principles of adequacy and accuracy disclosure, standardization, clarity and conforming to the accounting laws and standards.

The last study was conducted by Prof. Pandya, H in 2013. The study topic was; Corporate Governance: Role of auditor and auditing committee in the India. The study highlights the roles and responsibilities of the auditors and auditing committees in protecting the interests of different stakeholders especially the investors. The author found out that auditors and the auditing committee plays an integral role in maintaining ethics and corporate values in organizations (Pandya, 2013, p. 59).

Common themes/findings

The four studies found out that accountants, auditors and audit committees plays a crucial role in the current corporate governance setup. Based on the agency and stakeholders’ theories, the studies established that corporate investors expect the auditors to act with trust and loyalty while exposing the frauds and resolving the financial problems facing their organizations (Akinola, 2013, p. 26; Hay, et al., 2017, p. 56). However, for auditors and accountants to play their roles effectively, their independence should be supported by other stakeholders. Corporates with strong and active audit and accounting departments enjoy strong internal control systems. Likewise, considering the crucial roles played by the auditors in corporate governance, accountants and auditors’ employment should be based on their experienced and the skills (Pandya, 2013, pp. 2-4). Assessment 3: Theoretical Concept

Likewise, the roles of the accountants and auditors should performed ethically and diligently by serving the interests of all stakeholders. The board of directors should give the audit and accounting department with the power to question the actions taken by the management in reference to performing corporate governance (Akinola, 2013, p. 33). The studies found out that more active and independent auditors and audit committees are associated with better accounting performance and adherence to accounting standards and regulations. In examining the relationship between auditors’ independence and corporate governance, the studies found that interference with accountants’ and auditors’ independence led corporate failures (Hay, et al., 2017, p. 457).

Another common finding by the studies was on the importance of corporate governance. The studies found out that good corporate governance supports positive economic development because it attracts new investors into a country. Corporate governance also reduce the cost of running businesses (Akinola, 2013, p. 34). Lastly, corporate governance reinforce the importance of accepting ethical codes in the corporate world. However, without an active and independent audit team, corporates are likely to incur immense losses (ITTONEN, 2010, p. 32). Even though the success of an organization requires the efforts and contribution of all the stakeholders, auditors and accountants play an integral role. Both the auditors and accountants are tasked with ensuring that all the financial transactional and processes have followed the established accounting and auditing standards and procedures (Pandya, 2013, p. 7).

Auditors are required to review the internal control systems so as to redress the identified system weaknesses and lapses. Moreover, corporates are also influenced by political opinions which is likely to enhance corporate corruption. It is duty of auditors to safeguard the shareholders’ interests by ensuring that corporate follow acceptable ethical norms and standards. In general, auditors plays an important role in the success and failure of corporate governance (Joksimović & Ahmed, 2017, p. 112).


Different themes/ findings

All the four studies focused on addressing the issues of corporate governance and auditors, accountants and audit committees. However, the four studies focused more on the role of auditors and talked less on the accountants in different jurisdictions. For example, Akinola (2013, p.43), focussed on the role of the Accountant and Auditor in Corporate Governance in Nigeria particularly focussing no the economic and political factors while the other three specifically focuses on the economic and managerial implications. Hay, et al. (2017, p. 76), was more like a review of the previous studies. The findings were not inclusive with both positive and negative conclusions. Some papers supported the correlation between strong and active and good corporate governance while others stated that auditors had no significant role in influence corporate governance. The study addresses the existing managerial implication of auditors responsibilities on corporate governance with the case studies of Australia and New Zealand (Ruia, 2016, p. 78).

Managerial implication

According to Hay, et al. (2017, p. 77), Corporate governance is defined as the system by which companies are directed and controlled. The system is designed to disclose the true and fair value of the corporate to the shareholders. Corporate governance should, therefore, conduct the corporate activities in accordance with the wishes of the shareholders. The management are supposed to maximise the owners’ wealth while adhering with the established rules and practices. The shareholders contracts the management and board of directors to run the company on their behalf as established under the contract theory. The shareholders are regarded as the principal while the management are regarded as the agents.

Although the management is supposed to act with honesty and transparency, there is always a conflict of interest between the two parties (Akinola, 2013, p. 36). Therefore, the corporate owners contract auditors to assure them that the management are running the company according to their wish. The auditors are supposed to examine the company financial reports and statements and assure that the management are acting with reliability and integrity (Afza, 2014, p. 258). The shareholders also need an assurance from the auditors that the management and board of directors have complied with relevant laws and regulations as well as maintained strong internal control systems to prevent frauds and fund embezzlement (Joksimović & Ahmed, 2017, p. 114). Assessment 3: Theoretical Concept

Therefore, accountants and auditors plays an important role in influencing the decision made by the management. Therefore, auditors have a direct implication on the managerial functions of a corporate.

Study limitations and proposed future research direction

The three studies, that is, Akinola (2013), Joksimović & Ahmed (2017), and Pandya (2013) provides no limitations and proposed future research direction on the roles of auditors in corporate governance. However, Hay, et al. (2017), states that the study had mixed findings hence it was difficult to make exhaustive conclusion. It was difficult to control all the factors that influence corporate governance. Therefore, the researchers proposed that future studies should focus on addressing the factors that influence the role of auditors on corporate governance. Assessment 3: Theoretical Concept

Reference List


Adelopo, I., 2013. Auditor Independence: Auditing, Corporate Governance and Market Confidence. London: Gower Publishing, Ltd..

Afza, T., 2014. Theoretical Perspective of Corporate Governance: A Review. European Journal of Scientific Research, 119(2), pp. 255-264.

Akinola, A. O., 2013. The Roles of Accountants and Auditors in Corporate Governance in Nigeria. International Journal of Humanities and Social Science, 4(1), pp. 26-38.

Hay, D., Stewart, J. & Redmayne, N. B., 2017. The Role of Auditing in Corporate Governance in Australia. Australian Accounting Review, 27(4).

IFAC, 2010. Handbook of International Quality Control, Auditing, Review, Other Assurance and Related Services Pronouncements. s.l., International Federation of Accountants.

ITTONEN, K., 2010. A Theoretical Examination of the Role of Auditing and the Relevance of Audit Reports. ACCOUNTING AND FINANCE, 61(28).

Joksimović, M. & Ahmed, A., 2017. THE INTERNAL AUDIT AS FUNCTION TO THE CORPORATE GOVERNANCE. Economy Review, 14(2), pp. 109-126.

Mahdavi, G. & Daryaei, A. A., 2016. Attitude toward auditing, marketing and corporate governance. International Journal of Corporate Social Responsibility, 1(7).

Pandya, H., 2013. Corporate Governance: Role of auditor and auditing committee. IPASJ International Journal of Management (IIJM), 1(2).

Răzvan, A., Melinda , C. & Fülöp, T., 2014. The Role of the Audit Committee in Corporate Governance – Case Study for a Sample of Companies Listed on BSE and the London Stock Exchange – FTSE 100. Procedia Economics and Finance, Volume 15, pp. 1033-1041.

Ruia, S., 2016. Corporate Governance: Role of auditor and auditing committee , New Delhi: The Insolvency Professionals, Chartered Accountant & Forensic Auditor.



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