According to Barney & Hesterly (2015), the Agency theory believes that the manager is likely to make decisions based on his interest while in S tewardship theory the manager acts on the responsibility and the authority of the principal . Therefore, for the strategic audit firm, the Stewardship theory applies best since the manager shall serve the interest of the business . I n partnership with senior management , t he board of directors protects and controls the assets belonging to the organization and employment of the top management . However, the involvement of the board should be very minimal so as to build up an organization that is managerial - focused.
In the United States (U.S), t he Sarbanes-Oxley Act (SOX) br ought about several vital changes . First, it emphasized the assessment of the personal liability of business executives and auditors . Secondly, it created the Public Company Accounting Oversight Board (PCAOB). This is a private-sector and non-profit corporation that oversees public companies audits as well as other issues . This is geared towards protecting the investors’ interests as well as furthering public interest in the preparation of accurate, informative and independent audit reports. Further, Section 404 of the Act requires all publicly-traded companies to establish internal procedures and controls for financial reporting. Subsequently, they must test, document and maintain these checks and procedures to foster their effectiveness. Therefore, the SOX reduces the possibilities of corporate fraud through an increment of the stringency of requirements and procedures for financial reporting.
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According to Friedman, the responsibilit y of business is to make a profit as long as the business stays within the rules of the game. Further, h e argue s that it’s hard to control the externalities of the firm . I agree with him due to the assertion that the business has to stay within game rules . These include the legal rules which lawfully control the externalities . Caroll’s responsibilities that pertain to social responsibilit ies include the ethical responsibility which is the urge for a business to be fair and do right even if the law does compel it . The second social responsibility is the discretionally responsibility which describes the resources contributed by the corporations towards social purposes. The two responsibilities are growing in support from corporations. This is due to the global call for businesses to embrace sustainability ( Barney & Hesterly , 2015) . This entails pursuing not only the economic but also social and environmental goals.
References
Barney, J. B., & Hesterly, W. (2015). Strategic management and competitive advantage concepts and cases . Pearson.
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