Corporate Governance Internal Audit Checklist

Corporate governance internal audits involve extensive research, observation and dialogue among employees. The best reports will highlight areas in need of improvement in your business.

As part of their legal due diligence stage, companies should produce policies and documents which demonstrate their dedication to good corporate governance practices. Examples may include:

1. Review of the Company’s Governance Structure
Good corporate governance structures foster transparency, accountability, problem identification and resolution as well as helping a company meet its strategic goals and find valuable partners. Conversely, poor governance may cast doubt upon an organization’s integrity leading to significant financial losses or even its collapse.

An effective committee structure enables boards of directors to address key issues more thoroughly than is possible at full board meetings, with audit, compensation and nominating/corporate governance committees generally acting as core governance functions.

A nominating/corporate governance committee must actively engage in succession planning, such as canvassing various sources for director candidates and hiring search firms. Furthermore, this committee should oversee the adoption of practices and policies designed to mitigate risks created by compensation programs (including a recoupment policy).

2. Review of the Company’s Board of Directors
Make sure that the board consists of individuals possessing an appropriate mix of skills and experiences to represent your company’s interests effectively. Revamp of board membership regularly as necessary, and have in place an effective succession plan both for board positions as well as senior management vacancies.

Identification and evaluation of conflicts of interest to assess whether company policies and procedures can adequately mitigate them; evaluation of own performance as board to find areas for improvement and identify how.

Review the composition of each committee, including the audit committee. Ensure it includes at least 50% independent non-executive directors. Record any committee meetings thoroughly. Establish the role and status of your company secretary to determine if they are independent.

3. Review of the Company’s Management
An internal audit of management focuses on how well a company runs its operations while adhering to industry standards and regulations.

This section of an audit checklist covers various topics, such as process definitions, process execution and evidence for inputs into processes. Furthermore, opportunities for improvement (OFI) should also be assessed so as to examine how a company may better its processes.

This section of the audit will also assess how effectively the board and management team communicate with shareholders and stakeholders, the risk management processes of the company and how these are administered, relationships between vendors, suppliers and lenders as well as reviewing how shareholders, investors and lenders interact with it.

4. Review of the Company’s Financial Statements
Investors frequently review a company’s financial statements, such as profit and loss statements and balance sheets, in order to assess its profitability and ability to continue operations. This information allows investors to assess a firm’s profitability as well as assess its viability going forward.

Management must act transparently and provide comprehensive disclosure of a company’s financial information, including an explanation of accounting policies and significant entries made based on managerial judgement. Compliance with stock exchange requirements or legal mandates regarding financial statements should also be clearly demonstrated.

Review a company’s management’s approach to risk. A successful risk strategy involves being proactive in identifying and mitigating threats, rather than reactively trying to fix problems as they arise. This will ensure the financial statements for a given business are accurate and complete.

5. Review of the Company’s Operations
Governance audits include an examination of your company’s operations as part of their scope. This involves looking at compliance with regulations as well as policies and procedures – to make sure you are managing your business efficiently while meeting industry standards.

Review of company anti-corruption practices should also include an assessment of local legal obligations related to reporting corruption to law enforcement agencies, and also how the company manages its associates – for instance ensuring they receive appropriate training on anti-corruption policies/documents.

An annual compliance reporting can give your organization peace of mind, knowing you are meeting industry standards and decreasing risks of noncompliance. Furthermore, this gives clients assurances of trustworthiness which can attract or retain them as customers.