The Role of the Firms Governance Bodies in the Fight against Fraud – Case of the Board of Directors.

Author(s)

Younès Bourass ,

Download Full PDF Pages: 12-15 | Views: 296 | Downloads: 91 | DOI: 10.5281/zenodo.3457719

Volume 3 - October 2014 (10)

Abstract

Following the recent financial scandals that have dominated the international scene (Enron, Parmalat, Worldcom, Madoff ...) due mainly to cases of fraud and breach of confidence, the attention given to mechanisms against these practices is increasingly growing. Indeed, to minimize conflicts of interest and potential fraud risk, the shareholders put in place various mechanisms of corporate governance (internal and external) to reduce managerial discretion and the potential for behavior deviant. Among this array of means of control, the agency theory considers the board of directors as the most appropriate mechanism to discipline management and force managers to act in the interests of shareholders. This article deals with the theme and highlights the role of governing bodies, in particular the board of directors, in the fight against fraud, through, on one side, the audit committee and ethics to convey within organizations, and on the other hand, the use of external audit and the participation in the construction of legal system of investor protection as a means of limiting the possibilities of accounting manipulation of leaders, to regulate conflicts and reduce the information asymmetry between principal and agent. In other words, recourse to an independent external auditor can be considered as a mechanism encouraging or forcing the individual or individuals, to whom Responsibility has been delegated, to act in the interests of the organization partners

Keywords

corporate governance, fraud, governance bodies, audit committee, ethics, external audit

References

  1. Aaker D.A., Jacobson R., "The Role of Risk in Explaining Differences in Profitability", Academy of Management Journal, vol. 30, n° 2, June, 1987, p. 277- 296.
  2. Alchian A.A., Demsetz H., "Production, Information Costs, and Economic Organization", American Economic Review, vol. 62, n°5, December, 1972, p. 777-795.
  3. Alexandre H., Paquerot M., "Efficacité des structures de contrôle et enracinement des dirigeants", Finance Contrôle Stratégie, vol. 3, n°2, Juin, 2000, p.5-29. Barclay M.J., Holderness C.G., "Private Benefits of Control of Public Corporations", Journal of Financial Economics, vol. 25, n°2, December, 1989, p. 371-395.
  4. Berle, A., Means, G., "The Modern Corporation and Private Property", Brace and World, New York, 1932.
  5. Cadbury A. (dir), "The Financial Aspects of Corporate Governance", Committee on the Financial Aspects of Corporate Governance and Gee and Co, December, 1992.
  6. Charreaux G., Pitol-belin J.P., "La théorie contractuelle des organisations: une application au conseil d’administration", Chapitre 6 in
  7. CHARREAUX G. [1997], Le gouvernement des entreprises, Collection Recherche en Gestion, Economica, 1985, p. 165-192.
  8. Charreaux G., "Pour une véritable théorie de la latitude managériale et du gouvernement des entreprises", Revue Française de Gestion, n° 111, NovembreDécembre, 1996, p. 50-64.
  9. Charreaux G., "Le gouvernement des entreprises", Collection Recherche en Gestion, Economica, 1997, 540 pages.
  10. Coase R.H, "The Nature of the Firm", Economica, n° 4, 1937, p. 386-405, Traduction française [1987], La nature de la firme, Revue Française d’Economie, Hiver.
  11. Cressey D. "Criminal Organization: Its Elementary Forms". Harper and Row, New York, 1972.
  12. Cubbin J., Leech D., "The Effect of Shareholding Dispersion on the Degree of Control in British Companies: Theory and Measurement", Economic
  13. Journal, vol. 93, n° 370, June, 1983, p. 351-369. Gallet O. "Halte aux fraudes : prévenir et détecter les fraudes en entreprise", Dunod, Paris, 2004.
  14. Ginglinger E., "L’actionnaire contrôleur", Revue Française de gestion, vol. 28, n° 141, NovembreDécembre, 2002, p. 37-56.
  15. Harris M., Raviv A., "Corporate Control Contests and Capital Structure", Journal of Financial Economics, vol. 20, n°1/2, January-March, 1988, p. 55-86.
  16. Holmström B., "Moral Hazard and Observability", Bell Journal of Economics, vol. 10, n° 1, Spring, 1979, p. 74-91.
  17. Jensen M., "Agency costs of overvalued equity", Financial Management, vol. 34, n°1, 2005, p. 5-19
  18. Leech D., "Corporate Ownership and Control: A New Look at the Evidence of Berle and Means", Oxford Economic Papers, New Series, vol. 39, n° 3, September, 1987, p. 534-551.
  19. Vienot M. (dir.), "Le conseil d’administration des sociétés cotées", CNPF, AFEP, Juillet, 1995.
  20. Zhang I.X., "Economic Consequences of the SarbanesOxley Act of 2002", Accounting and Economics review, vol. 44 n°1-2, 2007, p. 74-115

Cite this Article: