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Audit within the corporate governance paradigm: a cornerstone built on shifting sand?

Audit within the corporate governance paradigm: a cornerstone built on shifting sand?
Audit within the corporate governance paradigm: a cornerstone built on shifting sand?
This paper is a case study-based investigation of aspects of the current paradigmatic approach to ‘good’ corporate governance with its focus on the interlinked roles of internal control and risk management procedures, internal audit and external audit, overseen and co-ordinated by a formal structure of board committees, in particular the audit committee. The evidence that we adduce from the study of four high-profile cases of perceived accounting and governance failure provides limited assurance that this approach will in fact be cost-effective or efficient in preventing further such cases of accounting and governance failure. Specifically, issues as to remuneration and fee dependence; lack of relevant knowledge and expertise; and social and psychological dependence upon executive management appear to have significantly and negatively affected the quality of decision-making of governance gatekeepers. This suggests that further consideration of relevant economic, institutional and cognitive/behavioural factors beyond the rational choice model of traditional economics should underpin future developments in required modes and structures of governance.
Corporate governance, audit, independence, competence, remuneration and fee dependence, heuristics, bias.
1045-3172
90-105
Marnet, Oliver
6840910e-2e26-4e63-aa84-76c5c8d27877
Fairchild, Richard
38f9d11c-f47f-4ce4-be80-0e5dfcaac761
Gwilliam, David
db75e41b-60e7-4be1-a120-9887bafe691e
Marnet, Oliver
6840910e-2e26-4e63-aa84-76c5c8d27877
Fairchild, Richard
38f9d11c-f47f-4ce4-be80-0e5dfcaac761
Gwilliam, David
db75e41b-60e7-4be1-a120-9887bafe691e

Marnet, Oliver, Fairchild, Richard and Gwilliam, David (2019) Audit within the corporate governance paradigm: a cornerstone built on shifting sand? British Journal of Management, 30, 90-105. (doi:10.1111/1467-8551.12297).

Record type: Article

Abstract

This paper is a case study-based investigation of aspects of the current paradigmatic approach to ‘good’ corporate governance with its focus on the interlinked roles of internal control and risk management procedures, internal audit and external audit, overseen and co-ordinated by a formal structure of board committees, in particular the audit committee. The evidence that we adduce from the study of four high-profile cases of perceived accounting and governance failure provides limited assurance that this approach will in fact be cost-effective or efficient in preventing further such cases of accounting and governance failure. Specifically, issues as to remuneration and fee dependence; lack of relevant knowledge and expertise; and social and psychological dependence upon executive management appear to have significantly and negatively affected the quality of decision-making of governance gatekeepers. This suggests that further consideration of relevant economic, institutional and cognitive/behavioural factors beyond the rational choice model of traditional economics should underpin future developments in required modes and structures of governance.

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ShiftingSandBJMFinal - Accepted Manuscript
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More information

Accepted/In Press date: 13 February 2018
e-pub ahead of print date: 30 January 2019
Published date: 30 January 2019
Keywords: Corporate governance, audit, independence, competence, remuneration and fee dependence, heuristics, bias.

Identifiers

Local EPrints ID: 419407
URI: https://eprints.soton.ac.uk/id/eprint/419407
ISSN: 1045-3172
PURE UUID: 0de203dd-7498-4b94-acf4-2a1a23614daf
ORCID for Oliver Marnet: ORCID iD orcid.org/0000-0001-9450-2332

Catalogue record

Date deposited: 11 Apr 2018 16:31
Last modified: 17 Jul 2019 17:31

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