Law

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Browsing Law by Author "Abate, Dureti"

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    Ensuring Good Corporate Governance through Auditors: Appraisal of the Ethiopian Legal Regime Governing their Roles and Responsibilities
    (Addis Ababa University, 2016-05) Abate, Dureti; Keneaa, Zekarias (Associate Professor)
    Business organizations of the company form are the preferred mode of running business in modern society and they are considered one of the ingenious creations. The limited liability attribute of such organizations and the opportunity they provide for the public to pool resources together are the main traits that make them appealing. Inasmuch as companies offer the privilege of limited liability to their members and enable individuals to pool their resources, they also pose threat to creditors and members are usually forced to entrust management of their resources in the hands of few individuals. The special threats of companies and their significance in the economy compel putting in place legal framework that promotes good corporate governance. The problems of separation of ownership and control and threats to creditors are rectified by a check and balance mechanism of audit. Auditors are regarded as watchdogs of a company and they provide checks on the affairs of management, safeguarding shareholders and other stakeholders both from fraud and genuine mistakes. The conduct of audit enhances reliability of financial statements and can bring problems within the company to the attention of concerned bodies before crisis occurs. However, for auditors to discharge their duties as watchdogs of the company there needs to be a legal regime that effectively governs their roles and responsibilities. In the absence of effective laws that enhance the role of auditors in ensuring good corporate governance, they can be put in a difficult place where they can not discharge their responsibilities but rather further the interest of managers or their own personal interest. History has witnessed the collapse of companies around the world and in the wake, there have been various legal reforms focusing on how to best enable auditors discharge their duties and foster the good corporate governance of the companies. How to best ensure good corporate governance through auditors in various laws and corporate governance codes are dealt through mechanisms of ensuring their objectivity and effectiveness since checking the work of management is based on independence from management. The exclusion of individuals affiliated to members of a company from involving in audit of the company, prohibition of auditors from rendering certain types of services to their audit client, rules on appointment procedures and the forming of independent audit committees are measures taken in different countries in order to ensure good corporate governance through auditors. This work studies how to ensure good corporate governance of companies through external auditors and assesses the existing Ethiopian legal regime governing their roles and responsibilities to this end. It examines whether the legal frameworks foster the external auditors’ role in promoting good corporate governance of Ethiopian companies. The study was conducted based on legislative and comparative analysis. The findings of the study show that there are different possible ways to enhance the role of auditors in ensuring good corporate governance. It also shows that the current legal regime governing companies acknowledges external auditors have a very significant role in bringing about the good corporate governance of companies and there also exist some ongoing reforms. Finally, this work provides some recommendations which the writer considers appropriate.
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    Ensuring Good Corporate Governance through Auditors: Appraisal of the Ethiopian Legal Regime Governing their Roles and Responsibilities
    (Addis Ababa University, 2016-05) Abate, Dureti; Keneaa, Zekarias(Associate Professor)
    Business organizations of the company form are the preferred mode of running business in modern society and they are considered one of the ingenious creations. The limited liability attribute of such organizations and the opportunity they provide for the public to pool resources together are the main traits that make them appealing. Inasmuch as companies offer the privilege of limited liability to their members and enable individuals to pool their resources, they also pose threat to creditors and members are usually forced to entrust management of their resources in the hands of few individuals. The special threats of companies and their significance in the economy compel putting in place legal framework that promotes good corporate governance. The problems of separation of ownership and control and threats to creditors are rectified by a check and balance mechanism of audit. Auditors are regarded as watchdogs of a company and they provide checks on the affairs of management, safeguarding shareholders and other stakeholders both from fraud and genuine mistakes. The conduct of audit enhances reliability of financial statements and can bring problems within the company to the attention of concerned bodies before crisis occurs. However, for auditors to discharge their duties as watchdogs of the company there needs to be a legal regime that effectively governs their roles and responsibilities. In the absence of effective laws that enhance the role of auditors in ensuring good corporate governance, they can be put in a difficult place where they can not discharge their responsibilities but rather further the interest of managers or their own personal interest. History has witnessed the collapse of companies around the world and in the wake, there have been various legal reforms focusing on how to best enable auditors discharge their duties and foster the good corporate governance of the companies. How to best ensure good corporate governance through auditors in various laws and corporate governance codes are dealt through mechanisms of ensuring their objectivity and effectiveness since checking the work of management is based on independence from management. The exclusion of individuals affiliated to members of a company from involving in audit of the company, prohibition of auditors from rendering certain types of services to their audit client, rules on appointment procedures and the forming of independent audit committees are measures taken in different countries in order to ensure good corporate governance through auditors. This work studies how to ensure good corporate governance of companies through external auditors and assesses the existing Ethiopian legal regime governing their roles and responsibilities to this end. It examines whether the legal frameworks foster the external auditors’ role in promoting good corporate governance of Ethiopian companies. The study was conducted based on legislative and comparative analysis. The findings of the study show that there are different possible ways to enhance the role of auditors in ensuring good corporate governance. It also shows that the current legal regime governing companies acknowledges external auditors have a very significant role in bringing about the good corporate governance of companies and there also exist some ongoing reforms. Finally, this work provides some recommendations which the writer considers appropriate.