Role of External Auditor


External auditors help in ensuring good corporate governance by developing efficient crisis-management plans to be used in the event of allegations of corruption or fraud. A plan of this type involves assigning responsibilities to all administrative officials. Thus, if the company becomes involved in a crisis, officials have a plan to keep confidence among investors. Crisis management plans may also include control indicators, that are to be used with the media and law-enforcement officials. Also, an external auditor should always have a good relationship with regulators. Most regulators have good contact with firms that appear to have clear operations. External auditors evaluate the organization for compliance with regulations. Most regulators always trust company disclosures after an auditor attests to them. The essence of good corporate governance is to do the right things and to do them in the right way. Everyone involved in corporate governance, i.e. board of directors, shareholders and auditors, should work together to run efficiently the organizations for interest of all. Also, good corporate governance implies strong internal control systems, procedures and policies. Corporate governance refers to the acceptance of management as trustees on behalf of the stakeholders and is committed to the ethics and values in an organization. The responsibility of external auditors in corporate governance is to provide assurance of the corporation’s rational compliance with relevant laws and regulations, conduct its affairs fairly, and maintain effective controls against employee conflict of interest and fraud. An audit committee of independent directors have control over management and thereby, act as a sort of assurance to the shareholders that they will have full disclosure of correct information. It is generally acceptable, that in good corporate governance, the external auditor should suggest people act as independent directors to run the company in the right direction, to defend transparency and accountability and performance standards for investors and lender and protection for shareholders. Normally, shareholders of the company place very high trust in the auditor’s report, which shows the true and fair view of the accounts of the company. Besides, one defend, that external auditors should perform their duties with extreme care and vigilance to ensure that there is no illegal or improper transaction. As such the independent status of non-executive directors would contribute to auditor’s independence through bridging communication network.