The governance audit in Quebec evaluates how an organization is directed and controlled. It is a process that examines the structures, policies, and practices in place to ensure effective and compliant management. To better understand the objectives and frameworks surrounding these business evaluations, EB Tax Advisory sheds light on the subject.
Governance Audit: Definition
Conducted by an expert or independent committee, the governance audit examines the mechanisms by which an organization is directed, controlled, and monitored. It assesses compliance with governance best practices and the effectiveness of the decision-making structures in place.
In a company, this type of audit allows the evaluation of the following elements:
- Governance structure: verify if the board of directors and committees are functioning effectively and in compliance with best practices.
- Regulatory compliance: ensure that governance practices comply with current laws and regulations.
- Risk management: assess the effectiveness of risk management mechanisms and their integration into the governance framework.
- Transparency and accountability: verify if the organization is transparent in its decision-making processes and if it appropriately accounts for its actions.
Following these evaluations, you can strengthen the transparency of your decision-making processes, as well as the trust of your stakeholders (investors, employees, and other interested parties). Finally, a governance audit helps to prevent risks by identifying potential weaknesses in decision-making mechanisms.
Who Can Perform the Audit?
Generally, a governance audit is conducted by the following entities:
- Board of Directors: responsible for overall governance, overseeing management practices, and ensuring compliance with regulatory obligations.
- Specific committees: audit, governance, or human resources committees play a key role in overseeing specific aspects of governance.
How Does a Governance Audit Work?
The evaluation of a company’s governance generally follows these steps:
- Identification of the governance audit objectives by establishing an audit plan based on the organization’s risks and priorities.
- Review of governance structures, assessing the functioning of the board of directors, committees, and reporting structures.
- Policy analysis and review of governance policies, risk management practices, and internal control mechanisms.
- Production of a detailed report with findings, gaps compared to best practices, and recommendations to improve governance.
- Follow-up and verification of the implementation of recommendations and assessment of their impact on governance practices.
Reference Framework and Regulations in Quebec
In Quebec, governance audits are governed by the Business Corporations Act (BCA) and the requirements of the Autorité des Marchés Financiers (AMF) for publicly traded companies. These entities issue requirements regarding the standards and composition of governing bodies (committees, directors, etc.).
Auditors also refer to international standards such as those published by the OECD or the Corporate Governance Framework of the Institute of Corporate Directors (ICD).
This regulatory framework aims to ensure that the principles of good governance, including accountability, fairness, and integrity, are upheld within organizations.
Improve Your Governance Methods with Expert Help
As you have understood, a governance audit is essential to ensure that decision-making structures function optimally and comply with the law. Moreover, it contributes to sound management and better organizational performance!
To achieve relevant results for your organization, remember to:
- Regularly conduct governance audits to ensure that practices remain compliant and effective.
- Integrate best practices and internationally recognized governance standards.
- Ensure continuous training for board and committee members on modern governance practices.
Would you like to plan a governance audit for your company? Contact our experts to discuss your needs!
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