Sandra Billings, a forensic accountant, has been engaged by NewWay, a medium-sized company that has grown considerably over the years. NewWay was begun by Tom Sneethens, an entrepreneurial-minded person who has been very involved in every aspect of the business. In the last few years, however, Tom has not been able to oversee the operations of the company to the extent he has in the past and, as a result, has had to cede control over some of the more administrative tasks to others. Tom is now more involved in what he lovescreating new products and interacting with similarly-minded entrepreneurial employees on his team. Lately, NewWay has experienced fraud committed by collusion between an employee in accounting and a salesperson who also is an employee of the company. Specifically, the fraud involved entering fictitious sales in the salesperson's account so that the salesperson could earn higher bonuses in December, NewWay's year-end. Simultaneously, the accounting person increased Accounts Receivable and Sales to correspond to the sales entered for the salesperson. As a result, NewWay was defrauded of cash, and the financial statements, as of December 31, were misstated. Tom was devastated when he heard of the defalcation. To add to his misery, he wanted NewWay to apply for a loan to expand operations further. He was concerned that if the bank required an audit, the theft and financial statement misstatement would be discovered and, although the financial statements had been corrected, that the bank would not trust Tom and NewWay enough to loan the funds that Tom believed the company required. He listened carefully to Sandra as she spoke about improving the internal controls so that this type of nefarious activity would never again occur. He understood the importance of having adequate controls, but he couldn't understand the importance of something else Sandra discussed with him: corporate governance. Why would I need this? exclaimed Tom. I thought this was only for huge companies that are traded on Wall Street.

Required

How might Sandra respond to Tom's question and comment? Answer by listing a number of aspects of corporate governance that could help NewWay to operate so that it remains a profitable and viable company.

Explain how each of the pillars of corporate governance, if implemented, could benefit NewWay.