Chapter and others; this lead in economic crisis

Chapter I


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This highlights the overview and
background of corporate governance, the need for executing this study, the
research problem aimed to be investigated, the research objectives, the
relevance of this study and lastly the limitations.

1.1  Overview and Background

Corporate governance is generally known as
a group of rules and regulations that is meant to improve the accountability of
the organization to protect it from bankruptcy; top quality of corporate
governance ensures that the company is being accountable and executing well
(Shivdasani & Zenner, 2004). An exceptional move, which resulted in
increased interest about corporate governance, was the collapse of substantial
companies as Enron, WorldCom, and others; this lead in economic crisis since
many companies shared the same characteristics as Enron (Niskanen, 2005). Thus,
this shows why every firm should have strong company corporate governance. A
recent research by Yuedong, Dong, & Xingyu (2014) was done to study the
impact of corporate governance framework on internal audit. However, internal
audit is considered a key part in controlling and protecting any business from
bankruptcy and fraud, internal audits are being monitored by panel of
directors, external audits, top management, and the audit 2 committee (Yuedong,
Dong, & Xingyu, 2014). That being the circumstance, the current study
attempts to determine the  efficiency  of corporate governance components  regarding the functioning of internal audits
in  general public  and state-owned corporations in Lebanon.

1.2  Need for the study

Corporate governance became a challenging
concern for each corporation.  Acquiring
case of Lebanon since corporate governance is not legally required; companies are
likely to neglect {the value} of keeping quality corporate governance.  A large number of points of view recommended.  The value of existing relationships among the
list of major components of corporate governance, such as table of directors,
audit panel, top management, external review, and internal audit. The latter is
considered a source for the other components (Mihret & Admassu, 2011).

The purpose of this study is to determine,
which of those elements {influences} internal audits. First, the board of
directors signifies the shareholders in the company, so their interest might
conflict with others. However, by supervising inner audits, this will affect internal
audit tasks (Dawuda, 2010), so examining these effects will come plan the best
coordination between both parties. Moreover, the audit committee has expert in
the corporation over internal audit (DeZoort, et al., 2002); this romantic relationship
might affect internal audits, depending on extent to which the audit committee
affects on internal audits tasks. Furthermore, top management is a major factor
in the organization since the tasks of organizing and managing all actions are
their main duties (Institute of Directors, 2009). Thus, by presenting certain
procedures and restricting them over inside audits, this could control the
tasks accomplished by inside audits.

The last element is external auditors.  A large number of studies investigated the romantic
relationship between external audits and internal audits. The content by
Schneider (2009) highlights that in the {occurrence} of impartial guidance on
the task and duties given to external and internal auditors. This will likely
cause sharp dissatisfaction for the auditors involved. Additionally, a survey
was conducted for internal auditors, where it was reported that external
auditors (Schneider, 2009) do certainly not appreciate the work and efforts
offered by internal auditors. Thus, analysing the effects of exterior auditors
on internal auditors is essential.


1.3  Research Problem

Due to many previous collapses of
enormous organizations, corporate become a demanding matter to each company.  As a result, a high level of corporate
governance must be performed (Niskanen, 2005). In addition, many investigations
have shown {the value} for keeping good corporate governance in order that it benefits
public confidence.  Nevertheless,   the
Lebanese private and general public sectors still don’t consider corporate
governance as an important and obligatory system since it is not legally
required. The major issues would be the need to enhance the corporate
governance, but since corporate governance considers the balance of interest
between its stakeholders (management, financiers, shareholders etc.), the
result of such components should be examined on internal audits that are {in
charge of fraudulence detection (Mensah, et al., 2003).