PARTIES INVOLVED IN CORPORATE GOVERNANCE:

THEIR RESPECTIVE BOARD ROLE AND SPECIFIC RESPONSIBILITIES

Corporate governance and financial reporting reliability are receiving considerable attention
from a number of parties including regulators, standard setting bodies, the accounting profession,
lawmakers and financial statement users.

SHAREHOLDERS
 Broad role: Provide effective oversight through election of board members, approval of
major initiatives such as buying or selling stock, annual reports on management
compensation, from the board.

BOARD OF DIRECTORS
 Broad role: The major representative of stockholders to ensure that the organization is run
according to the organization’s charter and that there is proper accountability.
 Specific activities include among others:
1. Overall Operations
o Establishing the organization’s vision, mission, values and ethical standards.
o Delegating an appropriate level of authority to management.
o Demonstrating leadership.
o Assuming responsibility for the business relationship with CEO including his or
her appointment, succession, performance remuneration and dismissal.
o Overseeing aspects of the employment of the management team including
management remuneration, performance and succession planning.
o Recommending auditors and new directors to shareholders.
o Ensuring effective communication with shareholders and other stakeholders.
o Crisis management.
o Appointment of the CFO and corporate secretary.

2. Performance
o Ensuring the organization’s long-term viability and enhancing the financial
position.
o Formulating and overseeing implementation of corporate strategy.
o Approving the plan, budget and corporate policies.
o Agreeing key performance indicators (KPIs).
o Monitoring or assessing assessment, performance of the organization, the board
itself, management and major projects
o Overseeing the risk management framework and monitoring business risks.
o Monitoring developments in the industry and the operating environment.
o Oversight of the organization, including its control and accountability systems
o Approving and monitoring progress of major capital expenditure, capital
management and acquisitions and divestitures.

3. Compliance/Legal Conformance
o Understanding and protecting the organization’s financial position.
 o Requiring and monitoring legal and regulatory compliance including compliance
with accounting standards, unfair trading legislations, occupational health and
safety and environmental standards.
o Approving annual financial reports, annual reports and other public documents
or sensitive reports.
o Ensuring an effective system of internal controls exists and is operating as
expected.

NON-EXECUTIVE OR INDEPENDENT DIRECTORS

 Broad role: The same as the broad role of the entire board of directos
 Specific activities include among others:
o To understand the organization, its business, its operating environment and its
financial position
o To apply expertise and skills in the organization’s best interest
o To assist management to keep performance objectives at the top of its agenda
o To understand that his/her role is not to act as auditor, nor to act as a member of
the management team
o To respect the collective, cabinet nature of the board’s decisions
o To prepare for and attend board meetings
o To seek information on a timely basis to ensure that he/she is in a position to
contribute to the discussion when a matter comes before the board, or alert the
chairman in advance to the need for further information in relation to a particular
matter
o To ask appropriate questions relative to operations.

MANAGEMENT
 Broad role: Operations and accountability. Manage the organization effectively; provide
accurate and timely reports to shareholders and other stakeholders.
 Specific activities include among others:
o Recommend strategic direction and translate the strategic plan into the operations
of the business
o Manage the company’s human, physical and financial resources to achieve the
organization’s objectives-run the business
o Assume day to day responsibility for the organization’s conformance with
relevant laws and regulations and its compliance framework
o Develop, implement and manage the organization’s risk management and internal
control frameworks.
o Develop, implement and update policies and procedures
o Be alert to relevant trends in the industry and the organizations operating
environment
o Provide information to the board
o Act as conduit between the board and organization
o Developing financial and other reports that meet public, stakeholder and
regulatory requirements
AUDIT COMMITTEES OF THE BOARD OF DIRECTOS
 Broad role: provide oversight of the internal and external audit function and the process
of preparing the annual financial statements as well as public reports of internal control.
 Specific activities include among others:
o Selecting the external audit firm
o Approving any non-audit work performed by the audit firm
o Selecting and/or approving the appointment of the Chief Audit Executive (Internal
Auditor)
o Reviewing and approving the scope and budget of the internal audit function
o Discussing audit findings with internal auditor and external auditor and advising
the board (and management) on specific actions that should be taken.

REGULATORS (a. Board of Accountancy)

 Broad Role: Set accounting and auditing standards dictating underlying financial
reporting and auditing concepts; set the expectations of audit quality and accounting
quality.
 Specific activities include among others:
o Conducting CPA Licensure Board Examinations
o Approving accounting principles
o Approving auditing standards
o Interpreting previously issued standards implementing quality control processes to
ensure audit quality
o Educating members on audit and accounting requirements

REGULATORS (b. Securities and Exchange Commission)

 Broad role: Ensure the accuracy, timeliness and fairness of public reporting of financial
and other information for public companies
 Specific activities include among others:
o Reviewing filings with the SEC
o Interacting with Financial Reporting Standards Council in setting accounting
standards
o Specifying independence standards required of auditors that report on public
financial statements
o Identify corporate frauds, investigate causes and suggest remedial actions

EXTERNAL AUDITORS
 Broad role: perform audits of company financial statements to ensure that the statements
are free of material misstatements including misstatements that may be dure to fraud.
 Specific activities include among others:
o Audit of public company financial statements
o Audits of nonpublic company financial statements
o Other services such as tax or consulting

INTERNAL AUDITORS
  Broad role: perform audits of companies for compliance with company policies and laws,
audits to evaluate the efficiency of operations, and periodic evaluation and test of
controls.
 Specific activities include among others:
o Reporting results and analyses to the management (including operational
management) and audit committees
o Evaluating internal controls

Reference: Corporate Governance, Business Ethics, Risk Management and Internal Control
2019-2020 Edition Ma. Elenita Balatbat Cabrera and Gilbert Anthony B. Cabrera, page 19 to
23