Evaluating Control Risk from a Corporate Governance Perspective
Abstract
This study provides evidence that auditors analyzing board composition in terms of the percentage of internal directors should concurrently consider the presence of a nominating committee and management ownership, since the latter is a substitute for each of the other characteristics. Decision support tools should incorporate the alternative nature of these traits, as well as the positive relation of chairman/CEO duality, subsidiary CEO board membership, the proportion of other CEOs on a board, and institutional ownership to both accounting and market performance measures. A disproportionate share of the board as key executives of the auditee is associated with poorer performance. Since inherent risk of going concern relates to performance and such risk has implications for management control structure, auditors could improve risk assessments by considering the relative weights of corporate governance traits' association with performance. The linkage of these findings with prior literature, the use of checklists, and further research is discussed.
Citation
Wallace, W.A. and Cravens, K.S. (1997), "Evaluating Control Risk from a Corporate Governance Perspective", Managerial Finance, Vol. 23 No. 12, pp. 22-37. https://doi.org/10.1108/eb018659
Publisher
:MCB UP Ltd
Copyright © 1997, MCB UP Limited