Internal and External Supervisory Mechanisms in Corporate Governance

Abstract

Good corporate governance depends on well balanced relations between the supervisory mechanisms of the corporate governance process. Relations between the supervisory board, as the internal supervisory mechanism, and external auditing, as the external supervisory mechanism, are crucial for the development of good corporate governance practice.The supervisory board needs credible information in order to perform quality supervision and control over the company's management. Therefore, communication between the supervisory board and external auditing is necessary because of the irreplaceable role of external auditing in validating financial information. A relationship between the supervisory board and external auditing increasingly depends on the audit committee, a subcommittee of the supervisory board in charge of improving the financial reporting process and improving communication with external auditors.This empirical study focuses on analyzing the relationship between the supervisory board and external auditing in order to determine the current state of that relationship among businesses in Croatia and to determine possible guidelines for improving the relationship between the supervisory board and external auditing in practice. In addition, this study analyzes the relationship between the supervisory board and external auditing, and attempts to determine which factors could Internal and External Supervisory Mechanisms in Corporate GovernanceDarko Tipurić, Boris Tušek, Davor Filipović * Abstract:Good corporate governance depends on well balanced relations between supervisory mechanisms in the corporate governance process. Relations between the supervisory board, as the internal supervisory mechanism, and external auditing, as the external supervisory mechanism, are crucial for the development of good corporate governance practice. This paper focuses on analyzing the relationship between the supervisory board and external auditing in order to determine the current state of that relationship in the Republic of Croatia and to determine possible guidelines for improving the relationship between the supervisory board and external auditing in practice. In addition, this study analyzes the relationship between the supervisory board and external auditing, which could lead to the maximum efficiency of both the supervisory board and external auditing and tests that relationship in practice using publicly traded companies in Croatia. This study also analyzes the impact of the audit committee on the efficiency of the supervisory board and external auditing.

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