L.V. Appasaba

Corporate Governance

“ Corporate Governance to a large extent is a set of

mechanisms through which outside investors protect

themselves against expropriation by the insiders”

Thus CG is a system by which companies are run,

and the means by which they are responsive to their

shareholders, employees, and society.

It is a system by which companies are directed and

controlled; board of directed and controlled: boards of

directors are responsible for governance of companies.

Corporate governance is also concerned with the

ethics, values, and morals of a company and its

directors.

Need of Corporate Governance1. Impact of Globalisation

2. Economic Changes

3. Changes in the Structure of Shareholding

4. Financial Reporting and Transparency

5. Shareholders Net Worth and Net Wealth

Clause 49 of the Listing Agreement

The companies listed on the stock exchange are required

to comply with the regulations of the SEBI which drives

its powers from the SEBI Act,1992.

The main objective of Clause 49 of the Listing Agreement

is to promote the core principle of corporate governance,

fairness, transparency, accountability and responsibility.

Mandatory Items to be Included in Clause 49 on CG in the Annul Report of Companies.

1. A brief statement on company’s philosophy on code of governance

2. Board of Directors3. Audit Committee4. Remuneration Committee5. Shareholders Committee6. General Body Meetings7. Disclosures8. Means of Communication9. General Shareholder Information

HRAHRA is the process of identification and measuring data

about human resources, and communicating this

information to interested parties

Features of HRA1. It is a system of accounting in which identification of

human resources is made.2. Investment made in human resources are recorded.3. Measurement of cost and value of human resources is

made.4. Record is also maintained for the changes occurring in

human resources over a period of time.5. Information generated about human resources is

communicated through financial statements to the interested parties.

Need of HRA1. It helps in evaluating the return on investment in human

capital2. It helps in communicating the worth of human resources

to the organization and the general public.3. It helps in knowing whether the human resources have

been properly utilised or not.4. It provides quantitative information of human resources

which will help managers and investors in making decisions.

Methods of HRA1. Historical Method

2. Replacement Method

3. Opportunity Cost Method

4. Economic Valuation Method

5. Return on Efforts Employed Method.

Advantages of HRA1. Improvement in Internal Management Decisions2. Motivation of Employees for Production Purposes3. Impact on Investors Decisions4. Knowledge of Value of Employees on the Basis of

Training5. Knowledge about Economic Value of the Personnel6. Improvement in Decision Making Process7. Decision about Further Recruitment

Disadvantages of HRA1. Non-Availability of Standards

2. Opposition of Trade Unions

3. Expenditure on HRA

4. Objection about Treating Employees as Assets

5. Uncertainty about Continuance of Employee’s

Forensic AccountingForensic Accounting definitions commonly refer to fraud,

fraud prevention, and fraud investigations as the role of

the forensic accountant.

Need of Forensic Accounting Corporate Investigations

Litigation Support

Criminal Matters

Insurance Claims

Scope/Areas Covered by Forensic Accenting1. Certain engagement related to disputes.2. Shareholders and partnership disputes involving detailed

analysis of numerous accounting records to quantify the issues in dispute.

3. Cyber crimes like credit card frauds ATM cards etc. 4. Engagement involving criminal matters, involving

assessment of accounting systems and accounts presentations where forensic accountants are hired by the law enforcements agencies.

5. Employees fraud investigations involving procedures to determine existence, nature extent of fraud and may involve identification of the clauses.

6. Business economic losses viz contract disputes trademark and patent infringements, losses arising from breach of non-compete clauses, etc.

7. Cases involving medical insurance claims, medical malpractices resulting in economic losses.

Steps in Forensic Accounting 1. Meeting with the client

2. Performing a conflict

3. Carry-out preliminary investigative

4. Developing detailed action plan

5. Obtaining relevant evidence

6. Perform analysis

7. Prepare reports

8. Chart and graphics

Window Dressing“ Window dressing is the year-end practice of adjusting

portfolio weighting to meet compliance restrictions on

industry weighting and bond credit quality”

Features of WD1. It is an act making a company look better financially than it really is.

2. It is a technique in accounting that is used to present the financial

position of the company in a favourable light

3. WD links to the concepts of branding, which is one of the key

concepts of marketing.

Reasons of WD1. To show a stronger market position that is warranted.2. To influence share prices.3. To ward off takeovers bids4. To encourages investors5. To re-assurance lenders to finance6. To hide poor management decisions7. To satisfy the demands of major investors concerning the

level of return8. To achieve sales or profit target, thereby ensuring that

management bonuses are paid.

Method of WD1. Inflation of sales

2. Suppression of purchase costs

3. Inflation of assets

Sustainability Reporting A sustainability report present the organization’s values

and governance model, and demonstrates the link between its strategy and its commitment to a sustainable global economy.

An increasing number of companies and organization want to make their operations sustainable and contribute to sustainable development.

Sustainability reporting can help organizations to measure, understand and communicate their economic, environmental, and social and governance performance.

Advantages of WD1. Existing shareholders take advantages of WD and sell

their shares opportunistically.

1. There is considerable scope for WD in a company’s published accounts