👉The table of contents so far is here.
Chapter 12: Planned Economy and Corporate Management
12.5. Three types of audit systems
Corporate audits in a capitalist market economy often tend to be subordinate and lukewarm to profit-driven management bodies, and it is difficult to say that they, including external audits, are fully effective in preventing corporate scandals. Furthermore, there is currently little thought of making environmental audits independent.
Audit work in corporations under a sustainable planned economy can be broadly divided into three types. One is operational audits, which audit the overall status of business operations and compliance with laws and regulations; the other is accounting audits; and the third is environmental audits, which audit the compatibility of business activities with environmental sustainability.
Of these, the second type, accounting audits, are commissioned to external accountants and conducted neutrally. Strictly speaking, accounting audits are divided into general accounting audits and environmental accounting audits, but external accountants handle general accounting audits. Environmental accounting audits will be conducted by a newly established external environmental accountant (a publicly certified professional who quantitatively evaluates business activities with environmental sustainability in mind).
The first type of audit, operational audits, and the third type of audit, environmental audits, are conducted by an internal organization of the corporation. The nature of the auditing organization of a corporation differs depending on the type of corporation. This was already covered in the previous chapter when discussing the internal structure of corporations, but we will summarize it here:
First, in a production business organization, which is public enterprise subject to a planned economy, separate operational and environmental audit committees are established, each consisting of a large number of auditors. A large private production business corporation also has parallel operational and environmental audit committees.
The operational audit body is also responsible for auditing the work of the accounting auditor. The environmental audit body audits the work of environmental accountant and also audits daily operations to ensure they are environmentally sustainable. At least two members of the environmental audit body must hold ecolonomist qualifications.
Such audit bodies are loosely collegial bodies, and unlike management organizations, they do not have a chief position. Instead, each audit committee member performs overlapping duties. However, they can make joint audit recommendations to the management organization as needed and can also file lawsuits seeking injunctions against operations.
On the other hand, a small or medium-sized production cooperative is required to have a minimum of three auditors, at least one of whom must be an environmental auditor. In addition, a small cooperative labor group must appoint at least one external auditor, but no distinction is made between operational and environmental audits.
👉The papers published on this blog are meant to expand upon my On Communism
