This is a failure of the system. So much of window dressing has taken place in accounts that it should have been noticed much earlier. The government should immediately appoint a committee to examine the inherent weaknesses in the system and suitably amend the Companies Act, Sebi Regulations and other ancillary laws to ensure that there is no such repetition.
The proposed amendments should make mandatory periodical audits by individual auditors who may not necessarily be statutory auditors of the company. As mooted by the Institute of Chartered Accounts of India, there should be rotation of auditors in major companies. The Institute of Chartered Accounts of India must make a self-introspection and adopt the international accountancy standards. Their own system of disciplinary action should be tightened and from amongst their ranks those who have been found to be guilty, who are engaged in money laundering, be strictly dealt with. According to a senior police commissioner, in most fraud cases, there is a complicity of some chartered accountants.
Moreover, small investors should be protected by some system of insurance so that they may not lose confidence in equity market. The protection of interest of small investors is of great importance as they trust in the institutions and supervisory authorities and put their money hoping it would be safe. We want more and more people to invest in equity, stock exchanges and also deposit money with companies.
By Ramalingam Raju?s statement, he has absolved the independent directors so they can claim that they had no knowledge about the wrongdoings in the company. But it will be difficult for independent directors to get absolved during investigations.
After taking into consideration past fraud incidents, I must say our legal mechanism is moving so slowly and we are so much boggled by procedural law that the culprits in such cases are not booked in proper time and substantive justice eludes.
The market regulator, Sebi should go behind the printed results of selective basis and examine the real state of affairs. On sample basis, Sebi can pick up 5-10 companies and carry out this exercise.As a process of corporate governance, more and more lawyers, professors, technocrats, engineers should be appointed as independent directors on the board of directors. They may not be necessarily conversant with the day-to-day functioning of the company.
As told to Sanjay Jog. YP Trivedi is a senior lawyer, head of audit committee of RIL, Yash Birla Group