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Risk and Control Developments in Corporate Governance: changing the role of the external auditor?

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  • Claus Holm
  • Peter Birkholm Laursen

Abstract

Are the risk and control developments in corporate governance changing the role of the external auditor? This paper examines how the concepts of risk and control are incorporated in current corporate governance promulgations and analyses the implications for the role of the external auditor. It is suggested that up till now the corporate governance debate has strengthened the position or role of the internal auditor in the advantage of the role of the external auditor. The promulgations have influenced the internal control mechanisms, and the control responsibilities have become more explicit. Dominant determinants for the future role of the external auditor seem to be in conflict, namely the value adding function of the audit with an alignment of risk oriented efforts by the auditor and the company versus the notion of “back to basics”. The external auditors ought to recognise that they must be perceived as the experts regarding internal control and risk management and that this must be engrained as part of the service rendered, i.e. part of the value adding nature of an audit. At the same time they must improve the transparency of the audit standards and the communication processes of audit reporting.

Suggested Citation

  • Claus Holm & Peter Birkholm Laursen, 2007. "Risk and Control Developments in Corporate Governance: changing the role of the external auditor?," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(2), pages 322-333, March.
    • Handle: RePEc:bla:corgov:v:15:y:2007:i:2:p:322-333
    DOI: 10.1111/j.1467-8683.2007.00563.x
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    Cited by:

    1. Ntim, Collins G. & Lindop, Sarah & Thomas, Dennis A., 2013. "Corporate governance and risk reporting in South Africa: A study of corporate risk disclosures in the pre- and post-2007/2008 global financial crisis periods," International Review of Financial Analysis, Elsevier, vol. 30(C), pages 363-383.
    2. Loganathan Krishnan Author_Email: loganathan@utar.edu.my, 2011. "Legal Issues On The Scandals Involving Auditors," 2nd International Conference on Business and Economic Research (2nd ICBER 2011) Proceeding 2011-255, Conference Master Resources.
    3. Orhan Akisik & Graham Gal, 2014. "Financial performance and reviews of corporate social responsibility reports," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 25(3), pages 259-288, December.
    4. Oliver Henk, 2020. "Internal control through the lens of institutional work: a systematic literature review," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 31(3), pages 239-273, September.

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