Role of corporate governance, Auditors and Independent directors in an organisation.

1. Corporate Governance,
Auditors,
Independent Directors
GROUP 9
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2. Corporate Governance
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3. 3
“Corporate governance involves a set of relationships between a
company’s management, its board, its shareholders and other
stakeholders ..also the structure through which objectives of
the company are set, and the means of attaining those
objectives and monitoring performance are determined.”

4. 4
The manner in which corporation is run:
 Achieving its objectives
 Transparency of its operations
 Accountability and Reporting
 Good corporate Citizenship

5. 5
 Shareholder recognition
 Stakeholder interests
 Board responsibilities must be clearly outlined
 Ethical behaviour
 Business transparency

6. 6
 Satyam scam was not an easy issue. It has its own
complexities as it involved 14000 Crore scam.
 Taking this scam as a role model, it could be suggested that
there is a time to frame up good governance rules and see to
the proper implementation of it.
 Satyam scam had been the example for following poor
governance practices. It had failed to show good relation with
the shareholders and employees.
 So as to throw a light on the poor governance practice at one
of the major IT giants, the need to study such case is made
important.

7. Independent Directors

8. Independent Director
 An Independent director (also sometimes known as an outside director)
is a director (member) of a board of directors who does not have a
material relationship with company or related persons, except sitting
fees
 Independent Directors do not own shares in the company.

9. Eligibility and Qualifications of
Independent Directors
 Who, in the opinion of the Board, is a person of integrity and possesses
relevant expertise and experience;
 Who is or was not a promoter of the company,
 Who is not related to promoters or directors in the company
 Who has or had no pecuniary relationship with the company
 None of whose relative has or had pecuniary relationship or transaction
with the company.
 Who, neither himself nor any of his relative--

10. Importance of an Independent Director
 In a board of directors, Independent Director act as a person who can
evaluate the performance and well being of the company without any
conflict of interest or the undue influence of interested parties
 This includes:
 Independence from Management
 Compensation
 Conflict of Interest

11. Characteristics of an Independent
Director:
 Commitment to serve shareholders
 Good judgment & common sense
 Sufficient self esteem & confidence
 Diversity of perspective
 Expertise and objectivity
 Neutral bridge – family owners & non family managers

12. Applicability to Companies
Following class of companies are required to appoint at least 1/3 of total
number of directors on their Board of Directors as independent directors:
 Listed Companies,
 Public Companies having paid up share capital of one hundred crore
rupees or more; or
 Public Companies having turnover of three hundred crore rupees or
more;
 Public Companies which have, in aggregate, outstanding loans or
borrowings or debentures or deposits, exceeding two hundred crore
rupees.

13. AUDITORS

14. Appointment of Auditors(Sec 139)
Cases Government Company Other than Government Company
First Auditor( hold office till 1st
AGM)
By CAG Within 60 days of
registration else BOD in 30 days
By BOD in 30 days else in 90 days at
EGM
Subsequent Auditor By CAG within 180 days of
commencement of FY.
Made by members in AGM
Casual Vacancy : resignation By CAG within 30 days Within 3 months of
recommendation of BOD in meeting
Casual Vacancy : other than
resignation
By CAG within 30 days Within 30 days by BOD

15. Rights and Duties
 Rights
1. Right to access books of accounts
2. Auditor to sign auditors report
3. To attend general meeting( prior notice of 21 days)
4. Right to remuneration
 Duties
1. Make Financial reports
2. Liable to pay damages in case of misleading reporting
3. Fraud reporting
4. Comply with auditing standards

16. Tenure and Rotation
 Tenure : Company can appoint an individual as an auditor for more than one
term of five consecutive years and an audit firm as an auditor for more than
two terms of five consecutive years
 Rotation : the Act prohibits the following categories of companies from
appointing / reappointing an audit firm for more than 2 terms of 5
consecutive years, i.e. 10 consecutive years, after which such company
would be required to mandatorily rotate its auditors in accordance with the
Act
1. Listed Companies
2. Unlisted public Companies : paid up capital > Rs. 10 crores
3. Private Companies : paid up capital > Rs. 20 crores

17. Removal of Auditors
 Eligibility criteria- Chartered Accountant and has no Conflict of
Interest(Holding securities, debts owed to Co., business relationship with
in the company or its subsidiary)
 Removal-
-Special Resolution with prior approval of Central Govt.
-Acted in a fraudulent manner in relation to the company or its directors
or officers

18. THANK YOU
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