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

Author(s)

Younès Bourass ,

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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

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