Understanding Governance and Ethics

Corporate governance refers to the system of rules, practices, and processes by which a company is directed and controlled. It ensures that companies act in the best interests of stakeholders, including shareholders, employees, and the public.

Why Ethics Matter

Ethical behavior underpins trust in financial information and business practices. Accountants and companies are expected to act with integrity, objectivity, and professional competence, following codes of conduct such as the AICPA Code of Professional Conduct.

Governance Structures

Common governance structures include boards of directors, audit committees, and internal controls. These help prevent fraud, ensure compliance, and support sound decision-making.

Real-World Application

When companies have strong governance and ethical cultures, they're more likely to avoid scandals, attract investors, and maintain a positive reputation.

Key Points

• Board independence is critical for unbiased oversight.
• Whistleblower policies encourage reporting of unethical behavior.
• Effective internal controls reduce risk of errors and fraud.