Question

Westerly Woolens is a growing sole proprietorship that is considering going public. The owner knows that she will have to establish a board of directors, but she is confused by such acronyms as SEC and PCAOB. Additionally, she does not understand the difference between internal audit and external audit.

Prepare a memo to the owner of Westerly Woolens describing the concept of corporate governance and the roles of the following: board of directors, CEO, audit committee, PCAOB, external auditor, and internal audit function. Include the relevant requirements of the Sarbanes-Oxley Act of 2002 (SOX).

Type your communication in the response area below.

Answer 1

MEMO to the owner of Westerly Woolens.

• corporate governance ( CG)

corporate governance refers to the set of system,principals,and process by which a company is governed.they provide the guidlines as to how company can be directed or controlled such that it can fulfil its goal and objective in manner that add to the value of company. corporate governace in which company is directed and controlled.and also beneficial for all stakeholders in the long term.stakeholders in this case would include everyone ranging from the board of directors,management,shareholders to customer,employes and society.the management of the company hence assumes the role of trustee .

• role of board directors,CEO,audit commitee,PCAOB,external auditors,and internal audit function.

role of audit committee;

1 oversight of financial reporting and related internal control.

2 review of filings and earnings releases.

3 risk oversight.

4 ethics and compliance.

5 oversight of internal audit.

6 other interactions with management and the board.

7 audit committee external communication.

role of board of directors.

the boards primary role is to monitor management on behalf of the shareholders.board of directors is the important element of corporate governace .the board are accountable in many ways to the shareholders in a company.

Role of CEO.

1 leads the management in the day to day running of the group business in accordance with the business plans and within the budgets approved by the board.

2 develop and process the groups strategies and policy for the board consideration.

3 leads the management to ensure effective working relationships with chairman and the board by meeting or communication with the chairman on regular basis to review key development,issue,opportunity,and concerns.

Role of internal audit function.

1 the role of internal audit is rather to focus on value creation for an orgnization and on evaluating and suggesting improvements to corporate governance system of organization .

2 communicating information among the board,external and internal auditors and management.

Role of PCAOB.

1 the PCAOB is to oversee the auditor of public companies,protect the interests of investor and further the public interest in the preparation of independaents audit reports.

2 PCAOB does this tgrought its standards setting, inspections,enforcement.

relevent requirement of SOX (Sarbanes -Oxley act).

1 the public company accounting oversight board. ( PCAOB)

2 committee of sponsoring organization.( COSO)

3 control objective for information and related technology.(COBIT)

4 the inforamtion technology governance institute.(ITGI)