New Co’s Bill to make Auditors compensate for corporate frau

The new Companies Bill could contain a provision that will makeauditors compensate retail investors in cases of corporate fraud, a measure aimed at bringing in more accountability into audit profession.

In a representation made before the parliamentary standing committee on finance, the ministry of corporate affairs has suggested several such measures to restore investors’ confidence, affected by the alleged involvement of auditors in the Satyam scam.

The final version of the bill could also contain a provision empowering regulators to initiate civil and criminal action against auditors/ audit firms, if they are found to be a part of a fraud committed by any company.

The government is also looking to set up an independent body to oversee the quality of audit in the country. The body, being conceived on the lines of the Public Company Accounting Oversight Board in the US, will cut into the authority of the Institute of Chartered Accountants of India (ICAI). The ICAI has opposed the creation of this new body, which is seen as the government’s lack of faith in ICAI.

While the idea behind the proposal is to raise the accountability of auditors and imbibe greater reliability in corporate accounts, the move is likely to be supplemented with greater authority to auditors to verify financial details provided by companies.

A suggestion in this regard has been made by the parliamentary standing committee, which seeks to give auditors access to financial records of the subsidiaries of companies, which are outside India, and financial data on their transactions “The idea is to draw a balance between accountability and authority.Auditors will be given greater authority to do their work,” said an official in the ministry of corporate affairs.

Source : https://m.economictimes.com/PDAET/articleshow/6543548.cms

The Reserve Bank of India has cancelled the licence of Anyonya Co-operative Bank Ltd, India’s oldest co-operative bank.

Established in Vadodara in 1889 as Anyonya Sahayakari Mandali Co-operative Bank Ltd to provide an alternative to exploitation by moneylenders for Baroda’s residents, all efforts to revive it in close consultationwith the Government of Gujarat had failed and the depositors were being inconvenienced by continued uncertainty, according to the RBI.

The RBI delivered the order cancelling its licence to the bank after the close of business on September 3. The Registrar of Co-operative Societies, Gujarat, has also been requested to issue an order for winding up the bank and appoint a liquidator for the bank, according to a RBI press release.

On liquidation, every depositor is entitled to repayment of his/her deposits up to a monetary ceiling of1 lakh from the Deposit Insurance and Credit Guarantee Corporation under usual terms and conditions. The statutory inspection of the bank with reference to its financial position as on March 31, 2005 assessed the CRAR at (-) 49.2 per cent, negative networth of (-)2,181.61 lakh, erosion in deposits to the extent of 24.2 per cent. The bank had also defaulted in maintaining of SLR.

Efforts to merge the bank with Saraswat Co-operative Bank Ltd, Mumbai, also did not fructify. The revival proposal submitted by Anyonya was not found tenable/feasible as it did not specify the amount of capital to be contributed by investors.

Source : https://www.thehindubusinessline.com/2010/09/07/stories/2010090753310600.htm