GATE KEEPERS UNDERSTAND THEIR ROLES ARE DEPENDABLE

REGULATORY PARTNERS
Gate keepers that understand their roles are reliable regulatory
partners
o Auditors demand accurate financial statements that fully comply
with IFRS and ISA
o Issuer/Officers/Directors/Audit ommittees insist on complete!
accurate and timely information
o Issue "anagers insist on! reliable Due Diligence
o redit Rating Agencies issue reliable ratings
o Independent ompliance Officers insist on meaningful internal
controls and obser#ance of prudential standards
o Gate keepers strengthen the reliability of market participants
o Gate keepers strengthen trust and confidence throughout the
market
MARKETS ARE FAIR, EFFICIENT AND TRANSPARENT
Stock $%changes are well go#erned
&rofessional market participants obser#e prudential standards
Intermediary's compliance programs are rigorous and independent
Sur#eillance systems are effecti#e
(isted companies and intermediaries ha#e reliably audited financial
statements
Focus on reducing systemic risk
"anipulati#e practices are punished
)ew instruments * deri#ati#es! asset backed securities! repos
)ew trading platforms
A reliable yield cur#e benchmark inde% for pricing bonds
International capital in#estment and cross border trading
Banks and Capital Markets Development
Banks can play a number of supporting roles for securities markets: they can be
large holders of securities, underwriters and market makers, issuers, and
guarantors, as well as arrangers of securitizations.
The large involvement of banks in the securities business requires appropriate
regulations (firewalls!" to prevent the issuance of bonds to repay loans and the
subsequent sale of the bonds to an asset manager subsidiary at higher#than
market prices.
Banking and bond markets could be developed in tandem, building an
appropriate regulatory and institutional framework to encompass both.
$owever, in the absence of a large institutional investor base, domestic debt
holdings may become too concentrated in the banking system.
This, in turn, could constrain the resolution of debt crises, as haircuts on the debt
could compromise the solvency of the banking system.
Risk and Contro D!"!o#$!nts in Cor#orat!
Go"!rnan%!& %'an(in( t'! ro! o) t'! !*t!rna
a+ditor,
Claus Holm and Peter Birkholm Laursen
Additional contact information
Corporate Governance : An International Review ! +,,-! #ol. /0! issue +! pages 1++*111
A-stra%t& Are the risk and control de#elopments in corporate go#ernance changing the
role of the e%ternal auditor2 3his paper e%amines how the concepts of risk and control
are incorporated in current corporate go#ernance promulgations and analyses the
implications for the role of the e%ternal auditor. It is suggested that up till now the
corporate go#ernance debate has strengthened the position or role of the internal
auditor in the ad#antage of the role of the e%ternal auditor. 3he promulgations ha#e
influenced the internal control mechanisms! and the control responsibilities ha#e
become more e%plicit. Dominant determinants for the future role of the e%ternal auditor
seem to be in conflict! namely the #alue adding function of the audit with an alignment
of risk oriented efforts by the auditor and the company #ersus the notion of 4back to
basics4. 3he e%ternal auditors ought to recognise that they must be percei#ed as 4the4
e%perts regarding internal control and risk management and that this must be ingrained
as part of the ser#ice rendered! i.e. part of the #alue adding nature of an audit. At the
same time they must impro#e the transparency of the audit standards and the
communication processes of audit reporting. opyright 5c6 +,,- 3he Authors7 8ournal
compilation 5c6 +,,- 9lackwell &ublishing (td.
Dat!& +,,-