Customs, processes, regulations and habits affect how an institution or corporation is directed, controlled or administered. Corporate governance includes relationships among the stakeholders and goals for which the corporation is governed. Governance generally remains the most difficult component involved in the comprehensive Governance, Risk and Compliance (GRC) initiative.
Corporate governance is less stable than risk management and compliance. Keys to comprehensive corporate governance initiatives involve procedures implemented to provide reasonable assurance the entity achieves objectives related to reliable financial reports, efficient operations and compliance with laws and regulations. Stakeholders at the entity must test designs and the implementation of the internal control procedures besides the reliability of financial reports. Sarbanes-Oxley Act has had a positive global effect on business ethics. Both U.S. and non-U.S. companies note customers or supply chain partners request new levels of transaction documentation. This encourages discipline within finance departments.
Section 302 of the act requires certification of a company’s financial statement and also evaluation of internal controls within a certain timeframe. Section 404 requires each annual report to contain an internal control report to include assessments of effectiveness within the internal control structure and procedures for financial reporting. Sarbanes-Oxley Act requires an external auditor attest to and report the assessment by management. Thus, the case for corporate governance within the Sarbanes-Oxley Act ensures marked improvements in security and critical management, thus a reduction in risk.