Lots of moving parts here. just for arguments sake let’s make an assumption that the closely held company (small number of partners and even smaller number of senior partners) still maintained Arthur Andersen’s principles of stringent auditing and the chair presented a different model that separated stringent activities and wanted to create something else in addition.
I am troubled by the number of comments that suggest making money requires one to be not ethical or not principled?
The partners did not agree with the chairs suggested model because they wanted to continue making money through the stringent approach and any infringement on the dearly held reputation would lose them money (which certainly happened in the end)
I asked the question of our auditor, in today’s world have you split your company into two to manage the different functions? The answer was no. But today they follow a rigorous process to manage conflict. Conflicts are rigorously disclosed and they refrain from participating if it’s a problem.
1.so the problem was the break down on keeping the principles sustainable
2 of course the buck stops with the owners and in this case we have all learned some hard lessons at their expense, hence new laws and regulations and best practises
3.competencies of boards now include
b. Director competencies in direction and control with skills in guiding CEO through authority, incentives and identity
C. Boards establishing what information they need for monitoring and in what form (new tools; risk governance vs risk management within a risk framework)
4. Now you can find external stakeholders (consultants, organizations, regulations) that can provide best practises on just about everything example CPA, Canadian Public Accountants – 20 questions directors can ask about series
However there will still be failures because sometimes you can’t protect people from there own stupidity (Canadian agency law, GHL Friedman p.111 but individually you can still act with duty of care. Duty as fiduciary and ethically