Plans and prospects

The members of the centre have a number of new projects under development. These include:


The role of auditing (internal and external) in serving shareholders, board of directors and its different committees.

Recent research funded by the Institute of Internal Auditors Research Foundation (IIARF) has addressed the role of internal auditors in mergers and acquisitions (Georges Selim et al, 2002) and the potential future role of internal auditors in strategic management (Rob Melville, 2002). Given the significant changes in the roles and mission of both external auditors (now primarily focused on assurance services) and internal auditors (whose new definition redefines their activities as consultancy, risk management and governance) there is a need to investigate the potential and actual contribution of all types of audit to organisations and their stakeholders.

External auditors' independence

There is still debate over the potential conflict of interests which might arise as a result of external audit firms providing additional non-audit services such as tax advice to their clients remain unabated. Research into the implications of legislation, regulations and pronouncements of bodies such as the EU on such matters should provide possible solutions for such issues.

IT governance, including the USA government's Critical Infrastructure Assurance Office (CIAO) project and the work of the IT Governance Institute
The CIAO project has stimulated professional bodies in North America to champion research into the levels of assurance senior management can infer from the integrity and resilience of their information systems. The UK and Europe have been key players in developing security management standards (most importantly ISO 17799) but more research is needed to identify how senior management obtain assurance that their IT infrastructure is effectively controlled.

Research into audit going concern disclosures to investigate whether such disclosures have predictive value relative to actual company outcomes

The internal auditor's role in assessing and contributing to corporate social responsibility (CSR) and sustainability

With the greater awareness of corporate governance that has developed since recent corporate failures, CSR and environmental issues are also resurfacing as key issues for senior management. The Institute of Internal Auditors has redefined the focus of internal auditing to address consultative, risk and assurance activities. Research is needed to evaluate the actual and potential role of internal audit in these areas.

Non-executive directors

Executive and NEDs' roles, experience and competencies
Over the last ten years or so, a number of prominent policy proposals have been enacted with the aim of improving the monitoring role of the board through strengthening the role of independent non-executive directors. These events have generated the 'corporate governance debate' and the 'Cadbury nexus'. At the beginning of 2003, two further were published, the Derek Higgs report on the role of non-executive directors and Sir Robert Smith's report on audit committees. Both reports build on existing best practice and continue to promote the code framework, whereby companies must 'comply or explain' non-conformance. Higgs focused on three key areas: the pivotal role of the chairman; the need for independent non-executives, free of potential conflicts of interest and; an enhanced role for the senior non-executive director vis-à-vis major shareholders. Both reports promote the belief that it is the quality of the directors and their commitment to challenging executive decisions and behaviours that are key to good corporate governance. The Centre has already undertaken research into the role of the non-executive and how this might best be performed. Recommendations made in these two reviews suggest that further research supported by theories in the organisational behaviour (OB) and human resource management (HRM) area can usefully illuminate and inform better practice. As Higgs has commented: "people are the key".

A review of the role and effectiveness of non-executive directors
The Higgs report (2003) suggested measures which organisations should introduce to enhance the contributions that NEDs make to an organisation's governance. Assertions made in this report need to be thoroughly investigated so as to identify that factors which will determine the success or failure of these recommendations.

Committees of the board

Developing measures of performance for evaluating the effectiveness of audit committees
Audit Committees have been presented as a panacea for companies affected by the unethical behaviour of company executives, fraudulent reporting of company transactions and fraud and corruption perpetrated by company officers. Despite this, no measures currently exist to assess the effectiveness of audit committees in the discharge of their responsibilities. Research into this area will help to provide answers.

Directors' remuneration and potential conflicts of interest between management, the board and shareholders

Executive remuneration levels remain a source of controversy. The role of remuneration committees is crucial in representing the interests of shareholders. However, board members who sit on remuneration committees experience significant conflicts of interest. The Higgs Report (2003) proposed new ways of overcoming these. The affect of the changes implemented is matter of intense research interest.

Membership and role of audit committees in the private and public sectors

Sarbanes-Oxley (USA), the new requirements of the Combined Code (UK), and European Union pronouncements have led to major changes in the composition and duties of audit committees in both public and private sectors. Research is needed to evaluate and assess current and future practice.

Communicating with stakeholders

Understanding the potential benefits from improved communication with investors and analysts

Companies often argue that they are under valued while at the same time releasing very restricted information about their performance and strategic choices. This is often motivated by a concern with keeping private what they view as commercially sensitive information. However, with the growth of a host of independent market research organisations and the increased use of outsourcing, much more of the information is available. Hence some companies might be needlessly restricting information flows to investors, resulting in lower valuation.

Understanding the evolving regulatory framework within which corporate disclosure takes place

The regulatory framework for corporate governance is changing rapidly, with increased requirements on directors to improve transparency. Companies need to understand how these evolving regulatory changes will affect the optimal design of their corporate disclosure strategies.

Study to find out whether there is any systematic evidence that small and medium cap firms that make more voluntary disclosures benefit in terms of a lower cost of capital and or reduced share price volatility.

Study of industry specific disclosures to see whether it is possible to consistently identify those disclosures that lead to most price volatility.