Continuing from the previous Post, Pathik sends me the following on Clause 49 and the Sarbanes Oxley Act;
The Sarbanes Oxley Act was primarily introduced subsequent to the Enron Scandal in order to regulate corporate governance in the US. India however failed to learn from US’s mistakes and did not introduce similar measures in India. The SEBI did introduce Clause 49 of the listing agreement requiring more disclosures from the Company. However, we are aware that Satyam managed to pull off a fraud of such magnitude despite formally complying with all the requirements under Clause 49 as well as other SEBI regulations such as the DIP Guidelines and so forth.
One also finds the need to reassess the liabilities and responsibilities of auditors under the Indian legal regime. The very fact that a member of the elite Big Four, Pricewaterhouse Coopers was caught completely unawares of the reality as it existed distinct from that portrayed in Satyam’s books of accounts indicates the need for more stringent checks on the role of auditors and to make them more accountable.
It is indeed encouraging that SEBI has already initiated steps towards strengthening the laws pertaining to Corporate Governance with the SEBI Committee on Disclosures and Accounting Standards (SCODA) met in Mumbai on January 9, 2009 and after detailed deliberations, the SCODA recommended that a peer review of the working papers (relating to financial statements of listed entities) of auditors would be conducted in respect of the companies constituting the NSE – Nifty 50 and the BSE Sensex. Such a review would be in relation to the last quarterly results and the last audited annual financial results. For this purpose, a panel of auditors would be prepared by SEBI. This exercise would be taken up following the publication of 3rd quarter results and is expected to be completed by end of February 2009. This recommendation has been accepted by SEBI. In light of the Satyam fiasco, SEBI needs to take a re-look at the mandatory requirements prescribed and set up more checks on the lines of the Sarbanes Oxley Act. Hopefully, the Companies Bill, 2008, shall be passed by the Parliament soon and provide us with a solution to avoid frauds of such magnitude, which end up tarnishing India’s corporate image in todays era of globalization.
It’s a funny thing to draw an example from SOX, since Satyam is listed on the NYSE
It just shows once again that the US markets are a complete mess, SOX or not.
very true Patrice. The present state of the US economy is very evident of it.
The Clause 49 pertaining to the corporate governance in India if we see in its true spirits is quite enough to cover the recent Satyam fiasco, the appointment of an audit committee with independent directors is something that should have been critically analysed by media instead of running after the MD and the Chairman who we, the government and SEBI know are guilty as charged.
What led to the failure was the role of the Audit Committee(who are mandatorily required to have financial knowledge and have great power to investigate but asking for documents and appointing outsiders) who are incharge of reviewing the financials of the Company.
In India independent directors role seems to be just a titular role i.e appointment being made just for the sake of compliance with Clause 49. It is weird that Central government as well as SEBI seem to be just investigating as to whatever Rajus’ seem to be throwing at them instead of digging the truth out of their own from different angle. Those who had waived from their fiduciary duty and have been negligent could be easily tried under the SEBI Act which has given wide powers to the SEBI to try guilty persons.
Wow! Thank you very much!
I always wanted to write in my blog something like that. Can I take part of your post to my blog?
Of course, I will add backlink?
Regards, Reader
surely you can.
thanks
Hi. Your site displays incorrectly in Opera, but content excellent! Thanks for your wise words:)