Corporate Governance

By: Gholamhossein Davani

Member of High Council Of Iranian Association Of Certified Public Accountants(IACPA)
Member of New York State Society of Certified Public Accountants (NYSSCPA)
Managing Partner of Dayarayan Auditing & Financial Services Firm ( Member of RSM
International)

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 Corporate Governance &
Accountability in Iran

Corporate governance (CG) is a hot topic

currently. It gets a lot of press, particularly
in the areas of compensation and board
activism. Corporate governance without
accountability has no meaning. It seems
corporate governance is one part of Good
governance (GG) and GG &CG prefect each
other.

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 Sustainable Corporate Governance
compliance is a careful mix of
economic viability, social
responsibility and sound
operations.

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 Importance of Ethics

“There is no such thing as business

ethics….There’s just ethics; and we
all have to practice them every day in
everything we do.”

Peter Drucker

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 What is COSo
The Committee of Sponsoring Organizations (COSO) was
formed by several professional groups, including the
Institute of Internal Auditors (IIA), Financial Executives
Institute (FEI), American Institute of Certified Public
Accountants (AICPA), American Accounting Association
(AAA), and Institute of Management Accountants (IMA). 
COSO's goal was to develop findings and recommendations
for an integrated framework of corporate internal control.
This was accomplished by first publishing the Report of the
National Commission on Fraudulent Financial Reporting
(popularly referred to as the Treadway Commission) in
1987, and the definitive Internal Control - Integrated
Framework in 1992.

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Good governance defines an ideal which
is difficult to achieve in its totality.
However, to ensure sustainable human
development, actions must be taken to
work towards this ideal. Major donors
and international financial institutions,
like the IMF or World Bank and
Eueopean Union is increasingly basing
their aid and loans on the condition
those reforms ensuring good
governance are undertaken.
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 Timeline of Corporate Governance
• The Higgs Review (2003) , UK
• The Cadbury Report (1992), UK
• Greenbury Report (1995) , UK
• Hampel Report1998), UK
• The Smith Report (2003), UK
• Information on the Company Law Review (2001)
• The Company Law White Paper (2002)
• Sarbanes- Oxley Act 2002 USA
• The Tyson report on the Recruitment and Development of Non-
Executive
• Directors (2003)
• The European Commission’s Action Plan for Company Law and
Corporate
• Governance (2003):

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 Valued market
• Good governance can be understood as a
set of 8 major characteristics:
• Participation
• Rule of law
• Transparency
• Responsiveness
• Consensus oriented
• Equity and inclusiveness
• Effectiveness and Efficiency
• Accountability

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 The most important above factor
is
• Accountability that is a concept in ethics
with several meanings. It is often used
synonymously with such concepts as
answerability, responsibility,
blameworthiness, liability and other terms
associated with the expectation of
account-giving. As an aspect of
governance, it has been central to
discussions related to problems in both the
public and private (corporation) worlds.
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• Social responsibility is a doctrine that
claims that an entity whether it is
state, government, corporation,
organization or individual has a
responsibility to society. This
responsibility can be "negative," in
that it is a responsibility to refrain
from acting, or it can be "positive,"
meaning a responsibility to act.
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Corporate social responsibility (CSR) is an
expression used to describe what some see
as a company’s obligation to be sensitive to
the needs of all of the stakeholders in its
business operations. Corporate Governance is
the construct through which the provisions of
a business are put in place, the way of
acquiring those objectives are discussed and
listed, the guidelines and expectations
regarding performance are measured and the
structure of resource use is outlined.

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 Organization under Corporate
:Governance Shall be
• Have an independent internal audit function reporting directly to the audit
committee of the board of directors, and administratively to executive
management;
• Have board-approved charters for both their audit committees and internal
audit departments;
• Have management and internal audit jointly perform risk assessments;
• Prepare annual audit plans based on the result of those risk assessments;
• Have internal audit test and report on the effectiveness of the existing
control activities, and management's ongoing efforts to correct deficiencies
as noted;
• Ensure that their internal auditors play the role of corporate teachers of
internal control;
• Ensure that internal auditors, through their collaborative interactions with
management, are part of the process of continuous improvement of the
control framework.

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 Accountability pathways

• Extended accountable entities

• Multi-stakeholder governance
• Assurance and reporting
• Ownership
• Regulation

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 : Board Meeting Decide as
• What is the optimum level and nature of
involvement in strategic plans and
implementation processes?
• What risks are on the horizon, and how can
the company manage them and seize the
inherent opportunities?
• How can executive performance best be
motivated, measured, and monitored?
• How effective is the board? How can it
improve?
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Iran Corporate Governance Includes

• Partner Rotation-Transition Questions

• Audit Partner and Partner Rotation-Other
Matters
• Non-audit Services
• Audit Committee Pre-approval
• Audit Committee Communications
• Fee Disclosures
• "Cooling Off" Period

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Audit firm shall be have
:minimum conditions as follow
• Minimum 5 partners
• All auditors shall be member of IACPA
• Minimum total issued audit report before admission shall
not be less than 50
• Quality control of audit firm with more than 10 listed
clients will be every year and between 5 till 10 clients
every two years and less than 5 clients every three years
• Prohibition of Audit & non-audit services for clients
onetime.
• Auditors' Quality control and supervision will be done by
joint committee of TSE and Iranian Association of
Certified Public Accountants (IACPA)
• Members shall keep appropriate records and submit
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copies of such on request of the TSE.
Accountability & Corporate
Governance

• Role of chief of the board

• Role of audit committee
• Role of non-Executive managers
• Role of internal audit
• Role of shareholders annual meeting
• Human resources control
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 Tehran Stock Exchange

• 415 listed company

• Market Value $ 33 Billion
• Non-Active Shares 150 Listed Co.
• Audit firm listed 123

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