Posts Tagged ‘audit committee’

Union Cabinet Approved the Implementation of Guidelines on Corporate Governance

The Union Cabinet approved the implementation of guidelines on corporate governance for Central Public Sector Enterprises (CPSEs) from voluntary to mandatory basis.

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The official statement said, “The guidelines have now been made mandatory and are applicable to all CPSEs. They cover issues like composition of Board of CPSEs, audit committee, subsidiary companies, disclosures, Code of conduct and ethics, risk management and reporting,”

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PSUs will now have to compulsorily follow corporate governance norms as per a cabinet decision.

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An official close to the matter said, “The guidelines have now been made mandatory and are applicable to all central public sector enterprises (CPSEs). The guidelines cover issues like composition of board of CPSEs, audit committee, subsidiary companies, disclosures, code of conduct and ethics,”.

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These guidelines follow from the first draft of June 2007 which were modified as per the feedback received during the experimental phase.

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It includes additional provisions relating to monitoring the compliance of guidelines by the CPSEs and formation of remuneration committee, reports IANS.

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The statement says, “There was a continued need to adopt and apply the good corporate governance practices in respect of CPSEs where huge public funds are invested in the light of recent events in the corporate world,”

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According to statements issued, “NKN is expected to encourage a larger section of research and educational institutions to create intellectual property. Health, education, grid computing, agriculture and e-Governance are the main applications identified for implementation and delivery on NKN,”

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In the initial phase, a core backbone consisting of 15 PoPs have been established with 2.5 Gbps capacity. Around 40 institutions of higher learning and advanced research have been connected to the network and six virtual classrooms set up.

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The statement added that the guidelines have been modified and improved with the experience gained during the experimental phase and includes additional provisions relating to monitoring the compliance of guidelines by the CPSEs and formation of a Remuneration Committee.

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Further, it said that suitable modifications in the guidelines would be carried out to bring them in line with prevailing laws, regulations and acts, adding that it will facilitate protection of interest of shareholders and other stakeholders, and also ensure transparency in the operations of CPSEs.

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Other details:

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” The number of functional directors should not exceed half of the board”s strength and at least a third should be independent directors.

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” The audit committee of these companies should have a minimum of three directors as members and an independent director should head the committee.

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Additional provisions relating to the compliance of guidelines by government-run firms and the formation of a remuneration committee.

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” Remuneration of directors should be disclosed in the company”s annual report.

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SEBI Proposes New Recommendations on “Audit & Accounting Standards”:)

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An expert panel of Securities and Exchange Board of India has proposed disclosure of audited balance sheet on a half-yearly basis by listed companies.

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At present, a listed company discloses audited accounts once a year at the annual general meeting.

This is among a slew of recommendations made by the Sebi committee on disclosure and accounting standards (Scoda).

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“The accounting irregularities at Satyam Computer Services reiterate the need for having greater internal checks and controls in an organisation,” the Sebi committee said in a discussion paper put out on Monday inviting public comments till September 25.

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Sebi will take a final decision on the new disclosure norms proposed by the committee after getting public comments.

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Pinning the responsibility of ensuring the independence of the external auditor and its partners on the audit committee of the company, Scoda has also proposed that the partner of the audit firm of a listed firm be rotated every five years to avoid management-auditor connivance.

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Citing scope for improvements in accounting norms, following the Satyam Computer scam, Sebi had asked Scoda to look into the possibility of carrying out internal checks and balances in firms by external auditors.

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Sebi panel proposals are expected to bring transparency in the corporate governance.

It is expected to lift the corporate governance standards in the country.

The need to upgrade standards was felt since the Satyam scam hit the market.

The guideline to rotate auditors after every five years is welcomed decision.

The decision to ask listed companies to report audited results twice a year may also lift investors’ confidence in the markets” said Jagannadham Thunuguntla, head of research at SMC Capital.

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Another issue, which Scoda felt may best remain unchanged is prescribing professional qualifications or financial literacy for chief executive officers and chief financial officers of companies.

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The committee suggested that the responsibility of selecting CFOs with adequate qualification be given to the audit committees of companies.

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The Scoda was of the view that the appointment of CFO should be approved by the audit committee, which while doing so shall be required to assess the qualifications, experience and background,” it said.

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Further, in order to prepare India Inc to adopt International Financial Reporting Standards (IFRS) that are expected to take effect from financial year 2011, Sebi had asked the committee to look into the possibility of allowing companies to voluntarily implement the practice.

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The committee has also proposed a uniform timeline for submission of financial results by listed entities.

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It has put forward that listed entities shall be required to submit their quarterly and year-to-date audited and standalone financial results or quarterly and year-to-date unaudited standalone results accompanied by limited review report of the auditor within 45 days from the end of the quarter.

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This is applicable to all quarters except the last one.

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