This document provides an overview of corporate governance and discusses the importance of the auditor's role. It addresses: - The growth of corporate governance in response to globalization and economic reforms. - Factors that have accelerated globalization like standardization, technology advances, and privatization. - How corporate governance principles aim to protect shareholder rights and ensure transparency. - The problem of improving auditor quality performance to better support corporate governance goals like accountability. - The research objectives of emphasizing the impact of stronger auditing in activating corporate governance. The document presents the research plan which includes exploring previous studies, conceptual frameworks, the comptroller's mechanisms, and results/recommendations. The importance

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4. Table of Contents
PageSubject
5CHAPTER I The General
Framework of the Research
15CHAPTER II
Previous Studies
41Chapter III
The Conceptual Frameworks
of Corporate Governance
89Chapter IV
The Comptroller’s
Mechanisms for Supporting
and Activating Corporate
governance
141Research Results
143Research Recommendations
145References

5. Chapter I
The General Framework of the Research

6. Introduction
Corporate governance has moved from the marginal position
that it has occupied for less than a decade ago to occupy the place that it
deserves in the minds of investors, companies, and the stock exchanges,
so it has became a main factor in the market.
This is due to a series of events that have occurred during the
last two decades that have been the cause of this priority of issues that
relate to corporate governance, both in the international business
community, and the international institutions of finance.
The astonishing collapses of the business institutions - such as
the famous collapse of the International Bank of Credit and Commerce,
the collapse of Savings and Loan Banks in the United States, and the
large gap between the salaries or bonuses of the executives of the
companies and the performance of the companies - are the motive for
requesting change in the developed countries. Most recently, the
collapse of Enron Company in the United States, and the failure of
governance in other places have led to speed up work on all levels. The
Stock Exchanges as well as Lawmakers all over the world from New
York to Beijing, including Moscow and Berlin, are working to
strengthen registration rules of financial markets, possession laws, and
the requirements of transparency. Also they are working to follow
optional rules, and encourage setting a classification for corporate
governance. There is a fundamental shift in the way of investors’
thought; subjects that have been ignored by many investors in the
community of investment as it belongs to Lawmakers in some emerging
markets, have became one of the basic requirements of financial markets
all over the world.
Governance is known as the procedures that are used by the
representatives of Stakeholders in the accounting unit (organization). It
can also be known as:
- Managing the organization to maximize its performance.

7. -Implementing systems that guarantee avoiding or reducing fraud,
interest conflicts, and irresponsible behavior.
- Systems that are used for controlling the company, the Board of
Directors, and the members.
- systems that are used for managing the establishment and controlling it
in accordance with a structure that determines the distribution of rights
and responsibilities among the participants; such as the Board of
Directors , the Administrative Authority , and Shareholders, also it forms
the rules and procedures of making decisions .
In a general meaning; corporate governance refers to the
ability of setting up a structure that provides a great deal of freedom in
the scope of law provisions. Some of the major changes include
following the international standards of transparency and disclosure, and
accuracy in financial statements so that investors and creditors can easily
compare potential investments. In a more general meaning ; the
implantation of corporate governance practices significantly lead to an
enhancement of the public confidence in the integrity of the privatization
process, and help the country to ensure the best return on its
investments; this in turn leads to increasing employment and economic
growth.
The original need for corporate governance emerges from the
separation between ownership and management (control) in the public
companies. Investors seek to invest their capital in the enterprises, as
many investors do not have time or experience for operating the
company and ensuring that it achieves a profit on their investment. As a
result, investors use persons with administrative experience for
managing the daily operations of the company to ensure that the
different activities of the company work for enhancing profitability and
long-term performance. However the need for Corporate governance in
developing, emerging, and transitional economies exceeds the solution
of problems arising from the separation between ownership and
management, as the developing and emerging economies often face
more issues such as lacking of property rights, misusing the rights of

8. minority Shareholders, breaching of contracts, looting of assets, and
dealing with the self. What is often overlooked is that corporate
governance is important for public sector companies as the same as for
private sector companies. The exerted efforts for implanting corporate
governance in the public sector have begun to own more attention
recently. This usually happens when countries are trying to eliminate the
spread of corruption in the public sector, or when these countries are
working for preparing the public sector to be privatized. In each
scenario; the procedures for good corporate governance helps to ensure
that the public get at a fair return on the national assets.
The Problem:
Some factors have helped to speed up the phenomenon of
Globalization & Economy. The most important factors that have helped
to speed up the phenomenon are the following:
1 - Standardization and Manner of Products and Processes.
2 - Advanced Developments in Technology.
3 - Infrastructure Improvements.
4 - Economic Reforms.
5 - Privatization of Public Sector Companies.
Globalization has several dimensions; the most important of
these is the economic dimension in its growing form for opening
markets and opening all countries of the world at each other; depending
on:
- Unprecedented movement of economic merger and blocs.
- Providing new widely using products that are produced at large
economical amounts.
- Using immediate and available market systems on all levels, especially
with the spread of e-commerce systems.
- Using means of payment and financing systems that base on defining

9. innovative types of money that characterize by immediate availability
where there is a high speed of conversion and widespread universal
acceptance.
- Using systems of investment in human beings that depend on
possessing the talents and characters that are able to detect and take
advantage of opportunities and invest them.
- The economic variables in its whole profile form the general features
of the new universal economic system; the most important of these
variables are the following:
Firstly: economic variables which associate with economic blocs.
Secondly: economic variables which associate with information
technology and communications.
Thirdly: economic variables which associate with Corporate
Governance.
The basic principles of corporate governance and what it imposes on the
accounting units appear in this figure no. (1).
Corporate governance has obliged the accounting units to put
frameworks and mechanisms with regard to establishing accounting
standards that can produce useful and helpful information for many
parties (the Board members - Investors - Stakeholders that enable them
Corporate governance
Principles
Shareholders Rights
Equitable Treatment of
Shareholders
Stakeholders Role
Disclosure & Transparency
Board responsibilities
OECD (2000), corporate governance Principles

10. to make rational decisions. Corporate governance has obliged the
accounting units to work for raising the efficiency of using resources,
and maximizing the value of the accounting unit besides supporting its
competition in the market in order to attract local and global sources of
fund for expansion and growth, and by the way enabling it to create new
job opportunities, taking in to account the stability of financial markets
and banking systems which lead to achieving efficiency and the required
economic development.
In this regard the International Institute of Finance (IIF) has
proposed in 2002 issuing Codes of Corporate Governance that can be
included in all laws of capital markets and corporations. The institution
also confirms that despite the importance of the proposed Codes, there is
a more important matter which is the efficiency of regulatory and
supervisory systems where the role of the supervising bodies is
maximizing in following the markets; that bases on two important props:
- Disclosure and Transparency
- Safe Accounting Standards.
In the same context, for activating more coherent mechanisms
with regard to disclosure and accounting standards, the OECD has
announced since November 2002, that Corporate Governance Principles
that have been issued, are updating now to coincide with the dynamic
movement of the capital markets all over the world.
The variables which associate with corporate governance represent in
the followings:
A) Increasing the size and growth of the economic institutions role in
global economy, where global economy consists of three sides that
represent in three major international institutions:
1 - World Trade Organization (WTO).
2 - The International Monetary Fund.
3 - The International Bank and its institutions.

11. B) The existence of substantial changes in the Egyptian economical
conditions such as ; the faster degrees of transition for privatizing the
public sector companies, the direct investments of foreign firms in the
Egyptian economy, increasing rates of participation with global foreign
companies , encouraging the foreign investments, and expanding
investment and development geographically to include areas such as;
Upper Egypt , the New Delta in South Egypt , the Northern Coast ,
Sinai, Hurgada, the new industrial cities, such as 6 October city, and the
city of Al-Asher Min Ramadan. There is also a growing interest in
export and diversification of income sources for the general budget of
the State.
C) Lack of transparency and available information for the investor,
because of poor performance of companies and banks that affect on the
performance of the Stock Exchange. Also the performance of the Stock
Exchange has been influenced by the phenomenon of mergers for
inflation of economic power and the phenomenon of privatization that
has led to losing investor’s confidence in the stock market.
The advanced technology has become one of the most
important competitive pillars in the business enterprise of the
contemporary economic environment. Thus, the processes of
transferring technology have become important issues on the agenda of
research that deserve study and examination. The meaning of
transferring technology is to sell (or get) information, documents, or
methods of technical nature or license to use them, either that relate to
manufacture processes, management, or marketing goods and services.
D) The increase of non-traditional forms of designing the organizational
structure of some organizations or some departments within the same
organization. Forms that are expected to increase are Matrix Design,
Network Structure, Work Groups or Work Teams, or Groups of
Operating Centers with Self-management. There is also an increase in
the use of divisional structure in the same companies, since these
designs work effectively in the light of changing and non-stable

12. organization, the rapid change in technology, and the non-stable markets
with high degrees of competition.
Some believe that the variables that associate with nature of the
contemporary accounting units (Enterprises) can be limited in the
following:
- Continuous increase in the size, and emerging the huge units.
- Separation between ownership and management, and increasing
awareness of investment among individuals.
- The growing importance of informal bodies and the necessity of
studying them.
- Continuous growth in the uses of computers in business and accounting
fields.
- The development of the methods of making decision and its need for
various accounting information.
- Growth needs of the internal and external parties that use accounting
information and need it.
Thus, the important role of the auditor has affected on the
success of corporate governance and increasing its effectiveness. The
problem of the research resides on the main question of the research:
- How can we improve the quality performance of the auditor to
ensure the success of corporate governance and increasing its
effectiveness?
And the following sub-questions:
Firstly: what is nature of corporate governance?
Secondly: Why is corporate governance?
Thirdly: What is the extent of relevance between the quality
performance of the auditor and accounting standards?
Fourthly: What is the extent of relevance between the quality
performance of the auditor and audit standards?

13. Fifthly: What is the impact of improving the quality performance of the
auditor in activating corporate governance?
The objective of the research:
The main objective of the research is to emphasize the impact
of improving the quality performance of the auditor in the success of
corporate governance and increasing its effectiveness; this will be
achieved through the following sub-goals:
- Emphasizing the importance of the different angles of corporate
governance.
- Showing the objectives and pillars of corporate governance, also its
characteristics and principles.
- Indicating the role of accounting standards and audit standards in
improving the quality performance of the auditor and its impact on
increasing the effectiveness of corporate governance.
The importance of the research:
This research is important as it shows the role of the auditor
in the success of corporate governance and increasing its effectiveness,
in order to face the challenges of globalization, attract investments, and
develop competitive capabilities and competencies of the companies.
The limits of research:
This research limits on the effect of improving the quality
performance of the auditor - through the levels of the conceptual
accounting framework, and the framework of the general standards of
audit - in the success of audit process and increasing its effectiveness.
The subject of the research:
The research depends on the interpolation method which
depends on the analysis and extrapolation of previous studies that relate
to the performance of the auditor and its impact on the success of
corporate governance and increasing its effectiveness, with taking
advantage of the expertise and experience of some countries that already

14. have applied the rules of corporate governance. The research also uses
the inductive method, which depends on inducting results and
relationships that relate between the auditor performance and corporate
governance.
The plan of the research:
In the context of achieving the objectives of the research; the plan of the
research represents in:
- Chapter I Introduction - nature of the problem - the objective of
the research - the importance of the research - the limits of the
research – the subject of the research – the plan of the research.
- Chapter II: Previous Studies.
- Chapter III: The Conceptual Frameworks of Corporate
Governance.
- Chapter IV: The Comptroller ’s Mechanisms for Supporting and
Activating Corporate Governance

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