Acca aaa s21 Notes

September 2021 to June 2022 exams
Watch free ACCA AAA lectures 
10

---

Only on 
OpenTuition
you can find: Free ACCA notes 
•
Free ACCA lectures 
•
Free ACCA tests 
•
Free ACCA tutor support 
•
The largest ACCA community
Chapter 2
CORPORATE GOVERNANCE AND 
AUDITOR REGULATION
1. Why corporate governance is needed
Corporate governance is the system by which companies are directed and controlled. Auditing 
financial statements adds to their credibility and this enables shareholders to better understand how 
the directors and company have performed.
2. Principles of corporate governance
The Organisation of Economic Cooperation Development (OECD) promotes six Principles of a 
corporate governance framework: 
๏
It should promote transparent and fair markets and the efficient allocation of resources and 
support effective supervision and enforcement.
๏
It should protect shareholders’ rights, ensuring fair treatment of all shareholders, including 
minority and foreign shareholders. For example all shareholders should have access to the same 
information.
๏
It should provide for stock markets to function in a way that contributes to good corporate 
governance (eg insider trading should be prohibited).
๏
It should recognise the rights of all stakeholders, not just shareholders, and encourage active 
cooperation between the entities and stakeholders in creating wealth, jobs and sustainability of 
financially sound entities.
๏
It should ensure timely and accurate disclosure on all material matters, including financial 
position, performance, ownership and governance.
๏
It should ensure the strategic guidance of the entity, effective monitoring of management by 
the board and the board’s accountability to the entity and their shareholders. In particular the 
board should set its own objectives, monitor its own performance and have its own 
performance assessed.