Madan Lal Bhasin

Corporate governance through an audit committee: an empirical study

Even though there are many measures to put corporate governance (CG) in place and practise, an important tool essential for the success is the efficacy and effective functioning of an audit committee (AC). Nowadays, an AC is being looked upon as a distinct culture for CG and has received wide-publicity across the globe. Government authorities, regulators and international bodies all have indicated that they view an AC as a potentially powerful tool that can enhance the reliability and transparency of financial information. Being mandatory under SEBI’s clause 49 of the listing agreement, an AC can be of great help to the board in implementing, monitoring and continuing ‘good’ CG practises to the benefit of the corporation and all its stakeholders. This study performs a ‘content’ analysis on the AC reports of the top 500 listed companies in India during 2005 to 2008 to determine the information content of these reports and the extent to which these reports conform to the clause 49 requirements of the SEBI. Also, discussed are the various trends about an AC characteristics viz., size, composition, activity, as well as, the extent of non-audit services provided by auditors in the top 500 listed Indian companies.

Intellectual Capital Reporting at the Crossroads

Intellectual capital (IC) is an important value driver in todays organization. Although IC reporting is receiving increasing attention from accountants in recent years, the innovativeness of the concept impedes IC from being fully incorporated in financial accounting reports as yet. At present, disclosure of IC-related information by companies is done on a voluntary basis, as applicable accounting regulations dictate the definition of a balance sheet and the assets to be included therein. Omission of IC-related information may adversely influence the decisions made by shareholders or lead to material misstatements. Only when companies provide IC statements on a large scale, we would be able to speak of a true reporting revolution in company valuation, both in theory and in practice. This paper attempts to review some prominent internal and external measurement methods of IC. There is a tremendous need for standardization and harmonization across companies and across national boundaries in the field of IC reporting. A solid theoretical base should be achieved at the earliest in order to advance in the field, and future research should focus on the development of IC guidelines as well as their international harmonization. Additionally, researchers should analyse IC reports published by pioneer firms, from around the world, to gather the best learning experiences. With this international insight, firms could be advised on how to introduce a new dimension in transparency that will strengthen its organizational governance. After more than a decade, the IC movement is still growing and more and more organizations are recognizing IC as the essence of business navigation.

Corporate Governance in Asia: The Challenge of Improving Transparency

Corporate governance (CG) has come to the limelight with the series of corporate failings following which the markets, investors, and society at large have begun to lose faith in the infallibility of these systems. Nowadays, the conduct of those who take care of ‘public’ money is being questioned since they are being tested on ‘ethical’ standards. We have advocated the application of ‘Dharma’, as stipulated in ancient Indian shastras. India can be proud of what it has achieved so far in CG practices but, of course, much more needs to be done. How to increase CG transparency in Asian countries is the biggest challenge? We have provided an overview of two independent studies recently reported by ACGA and JPMorgan. Full convergence with international accounting and audit standards, better protection of minority investors, and stronger enforcement of existing laws and regulations are some of the recommendations to improve governance in Asian countries. CG has been high on the agenda for Asian regulators in recent years with most markets having introduced comprehensive regulations. Still much work remains to be done and despite compelling evidence of the financial benefits to companies of a good governance culture, the ethos of CG has yet to sink in. Regulators, companies, and investors all have to play their vital roles. CG in Asia remains, at best, a work-in-progress requiring some rethinking.