A recent move by the RBI to reduce branch audits of banks has received significant attention of the media. As per media reports, banks have written to the RBI suggesting reduction in branch audit to reduce non-value added costs.It is argued that with concepts like core banking system and centralised record keeping, the relevance of the audit of branches of public sector banks (PSBs) has significantly declined. RBI will definitely decide the issue considering the pros and cons of reducing audit of branches of PSU banks. However, the move signals that companies have started evaluating audit in terms of the value it creates for them. They do not want to take it as an &lsquo;unavoidable burden&rsquo; any longer. It also signifies that with rapid technological innovations, the scope and techniques of audit are changing fast. This is not unique to the auditing profession. Every profession evolves on a continuous basis to keep itself relevant to the society.

Is audit losing its relevance?

Business Standard

Independence of statutory auditors has received attention of researchers and regulators for ages because independence is the cornerstone of statutory audit. Stakeholders rely on auditor&rsquo;s opinion because it is unbiased and based on professional judgement of someone who is capable of forming a judgement on the issues covered in the audit report. Therefore, laws are formulated to protect the independence of statutory auditors. Oversight and disciplinary mechanisms are strengthened, penalties are imposed for audit failures, environment is created to reduce subtle pressure on audit independence by introducing mechanisms such as rotation of the auditor and prohibition on offering non-audit services, and mechanisms are created to protect audit independence by creating institutions like the audit committee. Even after introduction of such elaborate mechanisms, the concern for audit independence persists.

Will appointment of auditors by regulators enhance independence?

Simply speaking, sustainability is about human well being, this generation and future generations. It is not limited to environment protection. It extends to managing socio-economic impact of decisions by different entities, including companies. Three Ps &ndash; planet, people and prosperity, capture the core principle of sustainability. A company contributes to sustainability only if it follows ethical practices and takes corporate social responsibility (CSR) seriously. A simple operational rule in business ethics is to ask whether the business decision will cause injury to any of the stakeholders, including the future generations of stakeholders. Stakeholders include the local community and the society in general. It is true that managers, all the time, cannot avoid decisions that would inflict injury on some of the stakeholders.

Asish K Bhattacharyya: Whole Life Costing: A more  inclusive  approach

The Government of India has recently used its power under the Constitution to issue a Presidential directive to compel Coal India Limited (CIL) to sign fuel supply agreements (FSAs) with power producers. An FSA will bind the state-owned miner to supply as much as 80 per cent of the fuel requirements of power plants or pay penalties if it doesn&rsquo;t meet the commitment. The government has issued the Presidential directive in the sovereign interest &ndash; to increase power production in order to reduce the gap between demand and supply.

Asish K Bhattacharyya: Independent directors: Are they lame ducks?

The recent ONGC share sale imbroglio, when the Life Insurance Corporation (LIC) was roped in at the last minute to rescue the Rs 12,000 crore issue, has raised many questions on the governance of state-owned enterprises.On March 12, 2012, The Business Standard carried a story titled &lsquo;LIC policy holders carry disinvestment can&rsquo;. The authors reported that &lsquo;while the companies it (LIC) had taken big bets on, have seen their share prices tumble, at least four public offers the insurer avoided have performed very well&rsquo;. On March 5, 2012, another financial daily reported IRDA&rsquo;s concern over corporate governance in LIC. The report mentioned two issues: appointment of CEO&rsquo;s of state-owned financial institutions as independent directors in the board of LIC and inclusion of government officials in the investment committee, which decides investment of funds, including policy holder&rsquo;s fund.

Learning in corporate governance

The approach of the West Bengal administration in handling the AMRI episode is resulting in wide spread discontent among industrialists. FICCI has vented that discontent by issuing a statement reflecting its discomfort.

Role of non-executive directors in spotlight

It is widely accepted that the presence of independent directors in the boardroom improves the quality of corporate governance. Accordingly, corporate governance mechanisms all over the globe, including in India, focus on 'independent directors'. The Companies Bill 2011 includes number of new provisions related to independent directors. It includes a 'Code For Independent Directors' (Schedule IV). According to the Bill an independent director is a director other than a managing director or a whole-time director or a nominee director, who is not a promoter and who fulfils certain conditions specified in the Bill. Primarily he/she does not have any pecuniary relationship with the company or he/she, with relatives, does not hold more than two percent of the voting power of the company. The Bill describes an independent director as a person of integrity, who possesses relevant expertise and experience.

Asish K Bhattacharyya

Asish K Bhattacharyya

Page 5 - Asish K Bhattacharyya

Is audit losing its relevance?

Will appointment of auditors by regulators enhance independence?

Asish K Bhattacharyya: Whole Life Costing: A more inclusive approach

Asish K Bhattacharyya: Independent directors: Are they lame ducks?

Learning in corporate governance

Role of non-executive directors in spotlight

Independent Director - a demigod?