Governance and Management: Accountability, Control and Performance
Core concepts
Governance concerns the systems by which organisations are directed and controlled: board structure, segregation of duties, internal control, risk management, audit, and accountability to stakeholders. Candidates should know the roles of the board, audit committee and external auditor, and the principles of good governance such as integrity, transparency and accountability. On the management side, understand planning, organising, leading and controlling; motivation and leadership theories; and performance measurement using financial and non-financial indicators.
Traps in questions
- Governance vs management. The board sets direction and oversees; management executes. Confusing the two is a common error.
- Internal control is not internal audit. Controls are the processes; internal audit provides independent assurance over them.
- Segregation of duties. The same person should not authorise, record and custody the same asset.
- Balanced scorecard. Financial measures alone are lagging; include customer, process and learning perspectives.
- Agency problem. Managers may pursue self-interest; governance mechanisms (independent directors, incentives, audit) align interests.
Rule of thumb
For any control question, ask: who authorises, who records, who holds the asset, and who checks? If one person performs conflicting roles, control is weak.
Worked example
A cashier receives cash, records the receipt and prepares the bank reconciliation. This breaches segregation: the person handling cash also records and reconciles it, allowing misappropriation to be concealed. The remedy is to separate custody from recording and have reconciliation done independently.