Page 46 - DCICAI SOUVENIR 2019

CORPORATE
GOVERNANCE -
IN THE ERA OF
FRAUD AND
IRREGULARITIES
CA Amarjit Chopra
President -ICAI 2010-11
A WAY FORWARD & SUGGESTIONS TO
AUTHENTICATE THE MECHANISM OF
CORPORATE GOVERNANCE
The corporate governance is more a game of
ethics than law, because it’s easy to breach and
manipulate the law, but it is moral ethics and will
of governors, which lead a society to the good
governance. Different Jurisdictions have varied
degrees of ethics and moral values (to an extent
practising of these would depend upon speedy
implementation of criminal actions.)
Following are the ways to achieve good corporate
governance
Sound internal control system – One of the most
crucial function of the board is to oversee the internal
control systems covering financial reporting and
the use of corporate assets and to guard against
abusive related party transactions. These functions
are sometimes assigned to the internal auditor
which should maintain direct access to the board.
Integrating risk management and internal control
system is imperative given the recent advent of
corporate mis governance and resulting swindles
and scams.
1. Transparency and integrity of data: An effective
internal control system and a robust corporate
governance framework requires transparency,
disclosure and integrity of data as essential
elements for keeping intact the business integrity
of a company and to establish corporate ethics.
Stakeholders are now more and more observant
of reliability of financial reporting, and various
stakeholders view good corporate governance
system as an asset of a company.
2. Continuous performance appraisal; keeping
staff motivated- It is vital to link integrity to
human resources practices (such as recruitment,
orientation, training, promotion, etc.), to ensure
that the funds of the company are not utilized for
malpractices and misconduct. and for personal
enrichment of few.
3. Working through and coordination in various
committees: Various stakeholder feel cheated by
promoters, managements, directors, regulators,
auditors and so on. Despite formation and working
of various committees (in some cases may be on
paper only and in some cases in effective only)
good governance is observed to be missing
4. Approval of related party transactions:
Unregulated and unscrutinised financial events can
yield many fraudulent activities in the company’s
working and hence the Companies Act regulates
transactions effected between related parties.
Certain transactions (above particular threshold
limits) require approval by a special regulation.
5. Corporate social responsibility: Corporate
social responsibility and corporate governance,
both focus on ethical practices in a business
organization, and a potential convergence of
the two builds public trust and confidence and
increases shareholder confidence and makes
better the relationships with stakeholders. It also
helps in creating sustainable society.
6. Delegation of authority & Rotation of jobs on
sensitive seats: The board remains responsible
for overall governance. This includes responsibility
of senior management and maintaining adequate
systems of risk management. So, the board needs