Agency Assurance - Universität St.Gallen

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directors’ appointment of company executive officers. Towards these two purposes,
the board enjoys two main powers:
approval - hiring, funding authority, strategic direction, and rewarding or
removal - firing, setting limits, withdrawing support, and divestment.
All of these rights, responsibilities, purposes, and powers are policed through review
and audit of information – primarily management-supplied information. Official
management controlled sources of such information include public disclosures; analyst
meetings, agency filings; most internal and external audit findings; audited financial
reports; prospectuses; resolutions for annual, interim, and special meetings of
shareholders; board meeting presentations and discussions; and even company
advertising, promotions, and announcements expected to have a material impact. 3
Unofficial (but legitimate) sources include articles in the business press, criminal
charges from government investigators, as well as complaints from internal whistle
blowers and reports of auditors in a small minority of situations.
The board of directors and the audit committee thereof are almost exclusively
dependent and bound by MSI. The audit committee, at the bequest of the full board,
examines information that has been accumulated, summarized, formatted, and edited
by management and their finance and accounting officers and, in the case of
accounting information for public reporting, tested by corporate auditors. It oversees
this audit process as the final step in a multiple step process of information production
and verification. The final ‘product’ must be reasonable and present fairly the results
and expectations of the business. And then to be of any value to the organizations’
stakeholders, MSI disclosures must be accessible and timely for input into their
decision support mechanisms. 4
2.2 The Triaxial Construct: Constitution, Classification, Communication
2.2.1 Agency Assurance: Definition and Framework
Agency theory identifies the moral and functional dilemma in public corporations
resulting from the separation of ownership from control (i.e. shareholders from
3 OECD (2004-1), pp. 50-54.
4 OECD (2004-1), p. 22.