The International Corporate Governance System (eBook)

Felix Lessambo is an Adjunct Associate Professor at St. John's University, USA (The Peter J. Tobin College of Business), where he teaches Financial Reporting: Evaluation and Analysis, Individual Tax Planning, and International Taxation. Prior to his St. John's appointment, Dr Lessambo taught Banking: Law & Economics, International Finance, International Tax, European Union Tax Laws at the University of Kinshasa (DRC). He specializes in the Taxation of International Business Transactions, Cross-border Transfer Pricing, E.U. laws, International Finance, and Alternative Investment Vehicles. He is the author of Taxation of International Business Transactions, Fundamentals of European Union Direct Tax, and Fundamentals of Hedge Funds. Dr. Lessambo has co-authored two best-selling BNA- Special Reports on Hedge Funds and Real Estate Investment Trust ('REIT). He has published over fifty leading articles in international tax law reviews. Having practiced in International Tax, Alternative Investment Management, and Global Banking Groups, he structured and advised on Hedge Funds, Private Equity, and cross-border securitizations.

Cover 1
Half-Title 2
Title 4
Copyright 5
Contents 6
List of Illustrations 22
Preface 23
Acknowledgments 26
List of Abbreviations 27
List of Cited Cases 32
Disclaimer 36
Part I Comparative Corporate Governance 38
1 Corporate Governance Framework 40
1.1 General 40
1.2 The legal framework 41
1.3 The political framework 42
1.4 The economic framework 42
1.5 Corporate governance structure 42
1.5.1 The concentrated corporate governance structure 43
1.5.2 The diluted corporate governance structure 43
1.6 Corporate governance core principles 43
1.6.1 Fairness 43
1.6.2 Accountability 44
1.6.3 Responsibility 44
1.6.4 Transparency 44
1.7 The irony of corporate governance 45
1.8 The shortness of the Anglo-Saxon corporate governance model 45
1.9 Toward a network corporate governance model 46
2 The OECD Corporate Governance Principles 47
2.1 General 47
2.2 The OECD core principles 48
2.2.1 The six OECD principles on corporate governance 48
2.2.2 The inefficiency of the six OECD principles 51
2.3 The future of the OECD guidelines 51
2.3.1 Partnership structure 52
2.3.2 Family businesses 52
2.4 Conclusion 55
3 The IMF Corporate Governance 56
3.1 General 56
3.2 Current organizational structure of the IMF 58
3.2.1 The executive board 59
3.2.2 The board of governors 59
3.2.3 The international monetary and financial committee 59
3.2.4 The management 60
3.2.5 The Joint IMF–World Bank Development Committee 60
3.2.6 The Independent Evaluation Office 60
3.2.7 Inadequacy of the IMF governance 61
3.3 Reforming the IMF corporate governance 61
3.3.1 An open and meritocratic process for leadership position 61
3.3.2 A review of the quotas at the IMF 61
3.3.2.1 Subscription 61
3.3.2.2 Voting power 62
3.3.2.3 Access to financing 62
3.3.3 An expansion of double majority systems of decision making 62
3.4 The IMF goals 62
3.5 The key functions of the IMF 63
3.5.1 Surveillance 63
3.5.2 Financing 64
3.5.3 Technical assistance 64
3.6 Categories of IMF lending 64
3.6.1 Concessional loans 65
3.6.2 Non-concessional loans 65
3.7 The IMF corporate governance strategy 66
3.8 Accountability, transparency at the IMF 67
3.8.1 Accountability 67
3.8.2 Transparency 68
3.8.3 Performance criteria (PC) 68
3.8.4 Program reviews (PRs) 68
3.8.5 Prior actions (PAs) 69
3.8.6 Structural adjustments (SAs) 69
3.9 Conclusion 69
3.9.1 Supplementary reading 70
4 The World Bank and Corporate Governance 72
4.1 General 72
4.2 Organizational structure of the World Bank 73
4.2.1 The Board of Governors 73
4.2.2 The Board of Directors 73
4.2.3 The Office of the President 75
4.2.4 The inadequacy of the World Bank governance 75
4.3 The aims of the World Bank 75
4.4 Reforming the World Bank governance structure 76
4.4.1 Voting rights 76
4.4.2 Representation to the executive board 77
4.5 The World Bank assessment of member states 77
4.6 Towards a World Bank for the twenty-first century 78
4.6.1 The protection of the minorities 78
4.6.2 The alteration of the voting rights 79
4.6.3 The establishment of an independent OIE 79
4.6.4 Changing the auditing process of the World Bank activities 79
4.7 Conclusion 79
4.7.1 Supplementary reading 80
5 Corporate Governance in the United States of America 83
5.1 General 83
5.2 The agency approach 84
5.2.1 The board fiduciary duties 84
5.2.1.1 Duty of care 84
5.2.1.2 Duty of loyalty 85
5.2.1.3 Good faith conduct 85
5.2.2 The safeguards: the business judgment rules 86
5.2.3 Limited shareholders’ rights 88
5.2.4 Reforming the BJR 89
5.3 The flaws and inadequacies of the agency approach 91
5.3.1 Conflict of interests 91
5.3.2 Corporate defensive tactics 92
5.3.2.1 Poison pill 92
5.3.2.2 The staggered board techniques 95
5.4 The financial and accounting framework: the Sarbanes-Oxley Act 98
5.4.1 Section 302: corporate responsibility for financial reports 99
5.4.2 Section 404: Assessment of internal control 99
5.4.3 Section 906: Certification of compliance with the SEC 99
5.4.4 Section 101: The Public Company Accounting Oversight Board 99
5.4.5 Section 301: Independent financial expert in the board 101
5.4.6 Section 1101: Corporate tax returns 101
5.5 Shareholders’ limited corporate governance rights 101
5.5.1 Limited rights compared to other developed systems 101
5.5.2 Shareholders’ derivative litigation: a hurdle race 102
5.6 Reforming the system: more checks and balances 107
5.6.1 New standard of liability 107
5.6.2 Recognition of the role of employees 108
5.6.3 Compensation system 111
5.6.4 Dismantling the board group-think culture 113
5.6.5 Reforming the federal judicial system 115
5.7 Conclusion 117
6 Corporate Governance in the United Kingdom 118
6.1 Introduction 118
6.2 The development of corporate governance in the UK 118
6.2.1 The Cadbury Report (1992) 118
6.2.2 The Greenbury Report (1995) 119
6.2.3 The Hampel Report (1998) 119
6.2.4 The Turnbull Report (1999) 119
6.2.5 The Higgs Report (2003) 119
6.2.6 The Tyson Report (2003) 120
6.2.7 The Revised Combined Code (2008) 120
6.3 The UK corporate governance approach 120
6.3.1 Corporate takeover 120
6.3.2 Call special meetings and amend the corporate charter 121
6.3.3 Removal of directors without cause 121
6.4 The role, functions, and remunerations of the board 121
6.4.1 The chairman 121
6.4.2 The board 122
6.5 The board accountability, internal control, and audit 123
6.6 The board relationship with the shareholders 123
6.7 Shareholder derivative action 123
6.8 The takeover market for corporate control 124
6.9 The pros and cons of the UK approach 126
7 Corporate Governance in Canada 127
7.1 General 127
7.2 The board duties 127
7.2.1 Duty to manage 127
7.2.2 Duty of loyalty or the fiduciary obligations 128
7.2.3 Duty of care 128
7.3 Role, functions, and remuneration of the board 128
7.3.1 The role and the functions 128
7.3.2 Audit committee 129
7.3.3 The remuneration of the board 129
7.4 Assessment of Duties 129
7.4.1 The proper purpose doctrine 129
7.4.2 The Business Judgment Rule (BJR) 131
7.5 Shareholders’ rights 134
7.6 The board relationship with stakeholders 135
7.6.1 Peoples Department Stores Inc (Trustee of) v. Wise 135
7.6.2 BCE Inc. v. 1976 Debentureholders 135
7.7 The market for corporate takeover 136
7.7.1 Takeover regulations 136
7.7.2 Takeovers defensive tactics 137
7.8 Conclusion 137
8 Corporate Governance in Australasia 138
8.1 General 138
8.2 Corporate governance in Australia 138
8.2.1 The ‘comply or explain’ approach 138
8.2.2 The board of directors 139
8.2.3 The shareholders’ rights 139
8.2.4 Integrity of financial reporting 140
8.2.5 The risk management process 140
8.2.6 Remuneration 140
8.3 Corporate governance in New Zealand 140
8.3.1 The board of directors 140
8.3.2 The audit committee 141
8.3.3 The remuneration committee 141
8.3.4 The nomination committee 141
8.4 Shareholder derivative action in Australia 142
8.5 Shareholder derivative action in New Zealand 142
8.6 Market for corporate takeovers in Australia 143
8.6.1 The Australian Securities and Investments Commission (ASIC) 143
8.6.2 The Takeovers Panel 143
8.7 Market for corporate takeovers in New Zealand 144
8.8 Conclusion 144
9 Corporate Governance in Japan 145
9.1 General 145
9.2 The purpose of the corporation in Japan 145
9.3 The structure of the Japanese corporation 146
9.3.1 Independent directors 146
9.3.2 The corporate auditor system 146
9.4 Board compensation 146
9.5 Shareholder derivative action 147
9.6 Market for corporate takeovers 148
9.6.1 The CVSG 148
9.6.2 The Tokyo Securities Exchange (TSE) 148
9.6.3 The Judicial 148
9.6.3.1 The Bull Dog Sauce 148
9.7 Shareholders rights 150
9.8 Conclusion 150
10 Corporate Governance in Continental Europe 151
10.1 General 151
10.2 Board structures 151
10.2.1 The two-tier structure 152
10.2.2 The unitary board 156
10.3 Executive compensation 160
10.3.1 The compensation committee approach 160
10.3.2 The government-capping approach (France) 161
10.4 Shareholder derivative action 161
10.4.1 Germany 161
10.4.2 Italy 161
10.4.3 Spain 161
10.4.4 France 162
10.4.5 Scandinavia 162
10.5 Market for corporate takeovers 162
10.5.1 Germany 162
10.5.2 Italy 163
10.5.3 Spain 164
10.5.4 France 165
10.5.5 Scandinavia 165
11 Corporate Governance in the BRICS 167
11.1 Introduction 167
11.2 Corporate governance in Brazil 168
11.2.1 The board of directors 168
11.2.2 The audit committee and the fiscal board 169
11.2.3 The independent auditor 169
11.2.4 The shareholders’ rights 170
11.2.5 The financial statements’ disclosure 170
11.2.6 Market for corporate takeovers 170
11.3 Corporate governance in Russia 170
11.3.1 The board structure 171
11.3.2 Internal control and external auditing 171
11.3.3 Shareholder derivative action 172
11.3.4 Market for corporate takeover 173
11.4 Corporate governance in India 174
11.4.1 The board of directors 174
11.4.2 The audit committee 175
11.4.3 Disclosure of transactions with subsidiaries 175
11.4.4 Disclosure of corporate transactions 175
11.4.4.1 Certification of the company financial statements 175
11.4.5 Shareholder derivative action 175
11.4.6 Market for corporate takeover 175
11.4.7 India’s corporate governance challenges 177
11.5 Corporate governance in China 177
11.5.1 The principal-to-principal relationship 177
11.5.2 Corporate management in China 178
11.5.2.1 The board of directors 178
11.5.2.2 The supervisory board 178
11.5.3 Shareholder derivative action 179
11.5.4 Market for corporate takeover 180
11.6 Corporate governance in South Africa 181
11.6.1 The board of directors 181
11.6.2 The stakeholders’ rights 184
11.6.3 The external auditor 185
11.6.4 Alternative dispute resolution 185
11.6.5 Shareholder derivative action 186
11.6.6 Market for corporate takeover 189
12 Corporate Governance in Saudi Arabia 191
12.1 General 191
12.2 The board of directors 191
12.2.1 The structure of the board 191
12.2.2 Responsibilities of the board 192
12.2.3 Board’s committees 192
12.3 The shareholders’ rights 193
12.4 Information and disclosure 193
12.5 Executive compensation 194
12.6 Shareholder derivative action 194
12.7 Market for corporate takeover 195
12.8 Conclusion 195
Part II Audit Roles 196
13 Internal Audit Process 198
13.1 General 198
13.2 Internal audit v. external audit 199
13.2.1 The internal auditor 199
13.2.2 The external auditor 199
13.3 The internal audit attribute standards 199
13.3.1 The purpose, authority, and responsibility of the internal auditor 200
13.3.2 The independence and objectivity of the auditor 200
13.3.3 The appropriate training 200
13.3.4 Due professional care 200
13.3.5 Quality assurance and improvement programs 200
13.3.6 Professional skepticism 201
13.4 The internal audit performance standards 201
13.4.1 The engagement planning 201
13.4.2 The scope of the engagement 202
13.4.3 The performance of the engagement 202
13.4.4 The disclosure of the audit 202
13.4.5 The monitoring process 202
14 The US Sarbanes-Oxley Act and the Audit Profession 203
14.1 General 203
14.2 The PCAOB 204
14.2.1 The PCAOB responsibilities 204
14.2.1.1 Registration of accounting firms 204
14.2.1.2 Inspections of registered public accounting firms 205
14.2.1.3 Establishment of auditing standards 208
14.2.1.4 Investigation and discipline of registered public accounting 208
14.2.2 The PCAOB enforcement role 209
14.3 The audit committee 209
14.3.1 Further reading 210
15 The Integrated Audit Process 214
15.1 General 214
15.2 Audit of internal control over financial reporting (ICFR) 214
15.2.1 Planning the audit 215
15.2.1.1 Role of risk assessment 216
15.2.1.2 Addressing the risk of fraud 216
15.2.1.3 Using the work of others 217
15.2.2 The auditor’s approach 217
15.2.2.1 Identifying entity-level controls 217
15.2.2.2 Identifying significant accounts and disclosures and their relevant assertions 219
15.2.2.3 Understanding likely sources of misstatement 219
15.2.2.4 Selecting controls to test 220
15.2.3 Testing controls 220
15.2.3.1 Nature of tests of controls 222
15.2.3.2 Evaluating identified deficiencies 223
15.2.4 Wrapping-up 225
15.2.5 Reporting on internal control 227
15.3 Audit of financial statements 228
15.3.1 Planning 229
15.3.2 Sample testing 230
15.3.2.1 Sample risk in substantive tests of details 231
15.3.2.2 Sample risk in tests of controls 232
15.3.2.3 Dual-purpose sample 234
15.3.3 Controls and transactions testing 234
15.3.4 Disclosure of testing 235
15.3.5 Issuance of the audit report 235
15.3.5.1 An unqualified opinion 235
15.3.5.2 A qualified opinion 236
15.3.5.3 An adverse opinion 236
15.3.5.4 A disclaimer of opinion 236
15.4 The ongoing concern report 236
16 Audit of Group Financial Statements 239
16.1 General 239
16.2 Audit strategy and audit plan 240
16.2.1 The group engagement team assuming responsibility 241
16.2.2 The group engagement team not assuming responsibility 243
16.3 Independence and competence of the component auditor 244
16.4 Assessment of materiality in group audit 245
16.4.1 Assessment of the component financial framework 246
16.4.2 Communication with a component auditor 246
16.5 Audit test related to group audit 247
16.5.1 Audit test for not-significant components 247
16.5.2 Audit test for significant components 248
16.6 The evaluation of the sufficiency and appropriateness of audit evidence 249
16.7 Communication between the lead audit and the group 249
16.7.1 Communication between the lead auditor and the group management 249
16.7.2 Communication between the lead auditor and the governance team 250
16.8 Documenting a group audit 251
16.9 The consolidation process 251
16.10 Conclusion 252
17 The European Union Statutory Audit Directive 253
17.1 General 253
17.2 Approval, education, practical training, and continuing training 253
17.2.1 Approval of statutory auditors or audit firms 254
17.2.2 Educational qualification 255
17.2.3 Continuing education 255
17.3 Registration, appointment and dismissal 255
17.3.1 For natural person auditors 255
17.3.2 For audit firms 256
17.4 Professional ethics, independence, objectivity, confidentiality 256
17.4.1 Professional ethics 256
17.4.2 Independence and objectivity 256
17.4.3 Confidentiality and professional secrecy 257
17.4.4 Auditing fees 257
17.5 Auditing standards and audit reporting 257
17.5.1 Auditing standards 257
17.5.2 Audit reporting 257
17.6 Quality assurance and auditors’ liability 258
17.6.1 Quality assurance 258
17.6.2 Auditors’ liability 258
17.7 Public oversight and arrangements between member states 259
17.7.1 Public oversight 259
17.7.2 Arrangements between member states 259
17.8 Statutory audits of public-interest entities 260
17.8.1 Transparency report 260
17.8.2 Audit committee 260
17.9 Approval of auditors from third countries 261
18 The Accounting and Auditing ROSC 262
18.1 General 262
18.2 ROSC corporate governance 262
18.2.1 Objectives 262
18.2.2 Methodology 262
18.2.3 Assessment 263
18.2.4 Final report 263
18.2.5 Shortcomings of the assessment 263
18.3 ROSC corporate governance and shareholder protection index 263
18.4 ROSC accounting and auditing 266
18.4.1 Objectives 266
18.4.2 Methodology 266
18.4.3 Assessment 267
18.4.4 Final report 267
18.5 Shortcomings of the assessments 267
18.5.1 Lack of guidance 268
18.5.2 Misunderstandings as to the nature of international standards 269
18.5.3 Lack of appropriate mechanisms for granting national authority to international standards 269
18.5.4 Inconsistencies between international standards and the legal framework 269
18.5.5 Lack of appropriate linkages between general-purpose financial reporting and regulatory reporting 269
18.5.6 Inappropriate scope of application of international standards 269
18.5.7 Non-observability of compliance 270
18.5.8 Improving the standards themselves 270
18.5.9 Mismatch between accounting and auditing requirements and market demands 270
18.5.10 Mismatch between accounting and auditing requirements and the capacity to comply 271
18.5.11 Mismatch between accounting and auditing requirements and domestic enforcement capacity 271
18.5.12 The special role of the international audit firm networks 271
18.6 The Saudi Arabia accounting ROSC 272
18.7 The US financial markets assessment 272
18.7.1 Introduction and methodology 272
18.7.2 Preconditions for effective securities regulation 272
18.7.3 Main findings 272
18.7.3.1 Assessments of IOSCO principles 273
18.7.4 Authorities’ response to the assessment 278
18.8 Conclusion 280
19 Corporate Governance, Accounting and Auditing Scandals 281
19.1 General 281
19.2 The triangle of fraud 281
19.2.1 Pressure or incentive 281
19.2.2 Opportunity 282
19.2.3 Rationalization of fraudulent behavior 282
19.3 Scandals in the US 283
19.3.1 The Enron scandal (auditor: Arthur Andersen) 283
19.3.2 The Bristol-Myers Squibb scandal (auditor: PricewaterhouseCoopers) 284
19.3.3 The WorldCom scandal (auditor: Arthur Andersen) 284
19.3.4 The Waste Management scandal (auditor: Arthur Andersen) 284
19.3.5 The Adelphia scandal (auditor: PricewaterhouseCoopers) 285
19.3.6 The AIG scandal (auditor: PricewaterhouseCoopers) 285
19.3.7 The Tyco scandal (auditor: PricewaterhouseCoopers) 286
19.3.8 The HealthSouth scandal (auditor: Ernst & Young)
19.3.9 The New Century Financial case (auditor: KPMG) 287
19.4 Scandals in Canada 288
19.4.1 The Bre-X scandal (auditor: Deloitte & Touche)
19.4.2 The Hollinger scandal (auditor: KPMG) 288
19.4.3 The Nortel scandal (auditor: Deloitte & Touche)
19.5 Scandals in the European Union 291
19.5.1 The Parmalat scandal (auditors: Deloitte & Touche and Grant Thornton)
19.5.2 The BCCI scandal (auditors: Price Waterhouse and Ernst & Young)
19.6 Scandals in Asia-Pacific 292
19.6.1 Japan 292
19.6.1.1 The Kanebo scandal (auditor: PricewaterhouseCoopers (PwC)) 292
19.6.1.2 The Olympus Corporation scandal (auditor: Hideo Yamada) 292
19.6.1.3 The Livedoor case (auditor PricewaterhouseCoopers) 293
19.6.2 India: the Satyam scandal (auditor: PricewaterhouseCoopers) 293
19.6.3 China: the Sino-Forest scandal (auditors: Ernst & Young and BDO)
19.6.4 Australia 295
19.6.4.1 The One.Tel scandal (auditor: Ernst & Young)
19.6.4.2 The HIH Insurance scandal (auditor: Arthur Andersen) 295
19.6.5 Scandals in South Africa 298
19.6.5.1 The Macmed scandal (auditor: Deloitte & Touche)
19.6.5.2 The LeisureNet scandal (auditors: Deloitte & Touche)
19.7 Diagnosis of the scandals 299
19.7.1 Corporate greed 299
19.7.2 Unfettered deregulation 300
19.7.3 Excessive compensation 300
19.7.4 Ineffective boards of directors 300
19.7.5 Lack of continuous training 300
20 Auditor Legal Liability 301
20.1 General 301
20.2 Auditor contractual liability: the engagement letter 301
20.3 Auditor common law tort liability 303
20.3.1 Duty 303
20.3.2 Breach of duty 304
20.3.3 Injury, loss, or damages 304
20.3.4 Causation 305
20.4 Auditor liabilities vis-à-vis third-party claimants 305
20.4.1 The privity approach 306
20.4.2 The near privity approach 307
20.4.3 The restatement of torts approach 308
20.4.4 The foreseeability approach 309
20.5 The auditor defenses 312
20.5.1 The in pari delicto: an equitable defense 312
20.5.1.1 The rationale 312
20.5.1.2 The adverse interest exception 312
20.5.1.3 Inconsistencies of the defense: conflicts among states 313
20.5.1.4 Imputation – AHERF 315
20.5.2 The absence of negligence 316
20.5.3 The contributory negligence doctrine 317
20.5.4 The comparative negligence doctrine 318
20.6 Auditor federal statutory liability 319
20.6.1 The Securities Act of 1933 319
20.6.2 The Securities Exchange Act of 1934 319
20.6.3 The Private Securities Litigation Reform Act of 1995 321
20.6.4 The Racketeer Influenced and Corrupt Organizations Act (RICO) 323
20.6.5 The Sarbanes-Oxley Act of 2002 324
20.7 Auditor state liability 324
20.8 Auditor criminal liability 325
20.9 Conclusion 329
21 The Future of Auditing 330
21.1 General 330
21.2 The inadequacy of the big-four business model 331
21.2.1 The regulators 332
21.2.2 The investors 332
21.2.3 The academics 332
21.2.4 The public 333
21.3 Rethinking the IFRS 333
21.4 Enhancing the education and training of the twenty-first century auditors 333
21.5 Reforming the immunization rules against liability 334
21.6 Enhancing the auditor curriculum 335
21.6.1 Related party transactions 335
21.6.2 Auditing estimates 336
21.7 Conclusion 338
Part III Board Oversight 340
22 Risk management 342
22.1 General 342
22.2 Sources of board risk oversight function 343
22.2.1 Laws of fiduciary duties 344
22.2.2 Federal laws and regulations 350
22.2.3 The SEC 350
22.2.4 The best practice codes 351
22.3 Objectives of risk management 351
22.4 The risk management principles 351
22.5 Types of corporate risk management 352
22.5.1 Strategic risk 352
22.5.2 Operational risk 353
22.5.3 Compliance risk 353
22.5.3.1 Anti-Corruption Act 354
22.5.3.2 US money laundering 355
22.5.3.3 US health and environmental concerns 356
22.5.4 Financial risk 356
22.5.4.1 Why organizations should hedge 357
22.5.4.2 Why organizations should not hedge 358
22.5.5 Choice of instruments 359
22.5.5.1 Natural hedges 359
22.5.5.2 Financial hedge instruments 360
23 Management Fraud 363
23.1 General 363
23.2 Motives for financial statements fraud 363
23.2.1 Incentives 364
23.2.2 Pressures 364
23.2.3 Opportunities 364
23.3 Types of management frauds 365
23.3.1 Intentional manipulation of financial statements 365
23.3.2 Misappropriation of tangible or intangible assets 365
23.3.3 Corruption 366
23.4 Management fraud indicators 367
23.4.1 Changes in accounting methods or policies 368
23.4.2 Aggressive use of GAAP options 368
23.5 Detection and prevention of management fraud 370
23.5.1 Detection of management fraud 370
23.5.2 Prevention of management fraud 372
23.6 Management fraud antecedents 373
23.6.1 Koss Corp. Coffers Co-Opted 374
23.6.2 PBS& J Corp., Miami, Florida
23.7 Changing the management culture 375
24 The Audit Committee and Management Fraud 376
24.1 General 376
24.2 Roles and functions of the audit committee 376
24.3 Communication between the audit committee and the auditor 377
24.3.1 Appointment and retention 377
24.3.2 Accounting policies and practices, estimates, and significant unusual transactions 379
24.3.3 Auditor’s evaluation of the quality of the company’s financial reporting 379
24.3.4 Other information in documents containing audited financial statements 380
24.4 Audit committee legal liabilities 382
24.5 Conclusion 384
24.5.1 General conclusion 384
Appendices 1
1 The OECD Principles of Corporate Governance 386
2 OECD Principles – Assessment Matrix 392
3 Report of the New York Stock Exchange Commission on Corporate Governance 395
4 German Corporate Governance Code 402
5 Norwegian Code of Practice for Corporate Governance 417
6 Sample Audit Engagement Letter 432
7 Report of Independent Registered Public Accounting Firm 435
8 Auditor Report with an Emphasis-of-Matter Paragraph 438
9 Auditor Report with an Other-Matter Paragraph 440
10 Sample of an Unqualified Opinion on Management’s Assessment of the Effectiveness of Internal Control over Financial Reporting and an Adverse Opinion on the Effectiveness of Internal Control over Financial Reporting Because of the Existence of a Material Weakness 442
11 Sample of Report Disclaiming an Opinion on Management’s Assessment of the Effectiveness of Internal Control over Financial Reporting and Disclaiming an Opinion on the Effectiveness of Internal Control over Financial Reporting because of a Limitation on the scope of the audit 445
12 Financial Ratios 447
13 The ROSC Standards and Codes 450
14 Wal Mart Stores Inc. Strategic Planning and Finance Committee Charter 455
Notes 458
Bibliography 473
Glossary of the Terms 474
Index 480
Blank Page 74