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The Role of Internal Audit in Optimization of Corporate Governance at the Groups of Companies

Author

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  • Ionel BOSTAN

    (“Ştefan cel Mare†University, Suceava)

  • Veronica GROSU

    (“Ştefan cel Mare†University, Suceava)

Abstract

Recent financial scandals have demonstrated that the risk of accounting fraud may be vague in any type of economic system. In this context, transparency of information, indispensable element for competitiveness in the market is an efficient operation of systems of corporate governance and especially of control systems. All these must be appropriate in the legislation in terms of external information. The issue of governance will thus be seen as a fundamental pillar against pressures which induce at the fraud as a result of lack of transparency of information flows. In all models of corporate governance, external regulations cover a primary role in ensuring the effectiveness of controls, but remain central the responsibility of entities to adopt a virtuous mechanism as an internal control profile. An example in this sense of "best practice" may be represented by the multinational companies that have known to harmonize the national rules with the typical instruments of other models of governance. The authors have established that the main objective in this work is the evaluation model of governance already existing in a group of companies in accordance with the principles of corporate governance. In the first part of the work it was made a comparitive analysis between the models of corporate governance, focusing on the role of transparency of communication, the primary tool in prevention of frauds, the link between information and prevention of frauds being independent of the model of corporate governance adopted, by the structure of organization and the control mechanisms. The work continued throughout the first part, with the role of internal audit in preventing the accounting fraud, given that any type of government, regardless of how it is configured and the reference market in which we find, to be considered efficiently must provide an appropriate control mechanisms, able to intervene in critical situations and to protect the interests of all categories of users. The role of internal audit of the company, considering the influences of the control of management, assumes a first importance in the corporate governance sphere. This was also the reason why the authors have proposed in the second part of the paper to build a model of optimal risk management in listed and unlisted companies, and based on a model of optimal corporate governance at the level at groups of enterprises, focusing on the fundamental role of the audit.

Suggested Citation

  • Ionel BOSTAN & Veronica GROSU, 2010. "The Role of Internal Audit in Optimization of Corporate Governance at the Groups of Companies," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 2(2(543)), pages 89-110, February.
  • Handle: RePEc:agr:journl:v:2(543):y:2010:i:2(543):p:89-110
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    1. repec:jes:wpaper:y:2012:v:4:p:419-428 is not listed on IDEAS
    2. Veronica Grosu & Dorel Mateș & Monica-Laura Zlati & Svetlana Mihaila & Marian Socoliuc & Marius-Sorin Ciubotariu & Simona-Maria Tanasă, 2020. "Econometric Model for Readjusting Significance Threshold Levels through Quick Audit Tests Used on Sustainable Companies," Sustainability, MDPI, vol. 12(19), pages 1-32, October.
    3. Claudia Diana Sabău-Popa & Luminița Rus & Dana Simona Gherai & Codruța Mare & Ioan Gheorghe Țara, 2021. "Study on Companies from the Energy Sector from the Perspective of Performance through the Operating Cash Flow," Energies, MDPI, vol. 14(12), pages 1-13, June.
    4. Ovidiu-Constantin Bunget & Dorel Mateș & Alin-Constantin Dumitrescu & Oana Bogdan & Valentin Burcă, 2020. "The Link between Board Structure, Audit, and Performance for Corporate Sustainability," Sustainability, MDPI, vol. 12(20), pages 1-27, October.
    5. Obeid Ahmed Obeid & Amna Abdelnur, 2018. "An Evaluation of Objectivity and Competence of Internal Audit Departments in Sudanese Government Units," International Journal of Economics and Financial Issues, Econjournals, vol. 8(3), pages 9-16.
    6. Georgiana Susmanschi, 2012. "Corruption - An Inhibiting Factor For The Efficient Implementation Of Structural Funds In Romania," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 4(3), pages 419-428, September.
    7. Georgiana SUSMANSCHI, 2012. "The Risk And Fraud Factors In The Contemporary Financial Banking System," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 7(2(20)/ Su), pages 189-193.
    8. Laura PANOIU, 2019. "Benefits And Limits Of The Management Control System In Romania," Contemporary Economy Journal, Constantin Brancoveanu University, vol. 4(3), pages 74-80.
    9. Gnilane Ndiaye & Cheng BO & V. V. Azenga & Juniter Kwamboka, 2019. "The Impact of Internal Control on the Profitability of Microfinance Institutions in Senegal," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 8(2), pages 41-51, April.

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