The Impact of Good Corporate Governance in Internal Control Essay

The Impact of Good Corporate Governance in Internal Control - Essay Example As result, nowadays, the corporate governance has a significant role to the companies to escape from failures in collapses or fraud. However, the discovery and prevention of fraud are significant challenges facing the business environment. Therefore, the ways in which companies' deals with fraud may enhance either the internal control and independent internal auditor or the need for forensic accounting. The forensic accounting is increasing in many organizations to identify situation, systems and security weaknesses by design and advise measure to reduce and limited inherent risk in the organization. The Enron and WorldCom in the US corporate collapses and fraud shook the foundation of the financial system and corporate governance, therefore; regulators in the U.S reform corporate governance by established the Sarbanes-Oxley act in June 2002 and Cadbury in the UK, in 1992, which now combine code. This assignment will illustrate the impact of good corporate governance in internal cont rol and internal auditing function to prevent fraud and detection. 2. Corporate governance and the prevention of fraud and detection Through the decades, the increase of the complexity of organizational activities have resulted to the increase of the difficulty of their control.   However, a mechanism should be also established ensuring that the rules and the guidelines included in the firm’s corporate governance scheme are followed. In any case, the value of the corporate governance as a framework for preventing fraud and defection across the organization cannot be doubted. This view is analytically explained below referring primarily to the main aspects and the role of corporate governance as a strategic tool for monitoring the progress of the organization in regard to its aims and mission; at the next level, the role of corporate governance in preventing fraud is presented explaining the challenges and the benefits of the involvement of corporate governance in such activity. 2.1 Corporate governance – role and characteristics Different approaches can be used in order to explain the role of corporate governance in modern organizations. In accordance with Anand (2007) corporate governance is a framework that ‘incorporates almost every aspe ct of corporate life’ (Anand 2007, p.77); however, it is explained that in its common form, the corporate governance framework consists of rules that aim to protect the interests of the firm’s shareholders (Anand 2007). On the other hand, Du Plessis et al. (2010) note that the term ‘corporate governance’ can incorporate many elements; among these elements two are considered to be the most important: the promotion of the interests of the shareholders and ‘the regulation/ monitoring of the corporate conduct’ (Du Plessis et al. 2010, p.10).