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ROLE OF DIRECTORS AND

AUDITORS IN CORPORATE

GOVERNANCE

Presented by-

Dinesh Lalwani

Divya Porwal

Gargy Sharma

Geetanshu Shekhawat

Himanshu Joshi

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Corporate Governance“Doing right things and doing them in the right way is the

essence of Corporate Governance ! "nonymous

Corporate governance refers to the relationship that e#ists$etween the di%erent participants and de&ning the intentionand implementation of a corporate &rm'

 (he $odies like the C)* i'e' the management+ the $oard ofdirectors+ the shareholders and the auditors and auditcommittee work together and mutually run an organi,ationfor interest of all the stakeholders'

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-oard of Directors• " $ody of elected or appointed mem$ers who .ointly

oversee the activities of a company or organi,ation'

• /n a stock corporation+ the $oard is elected $y theshareholders and is the highest authority in themanagement of the corporation'

• /n a non0stock corporation with no general votingmem$ership+ the $oard is the supreme governing $ody ofthe institution+ its mem$ers are sometimes chosen $y the$oard itself'

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1ey roles of -*Ds (he role of the -oard in creating an environment where a

corporation can succeed is the key to future success of the

$usiness'

 (he $oard should work to ensure that it $uilds a united+cohesive and coordinated team working towards the maingoal of attaining desired corporate performance'

 (here is need for greater control over corporate entities dueto the increasing concern a$out corporate failures and theneed for $etter monitoring'

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 (he key roles of -*Ds in corporate governance are as follows2

a) Establish vision, mission and values-

3' Determine the company4s vision and mission to guide and

set the pace for its current operations and futuredevelopment'

5' Determine the values to $e promoted throughout thecompany' Determine and review company goals'

6' Determine company policies'

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b) Set strategy and structure-

3' 7eview and evaluate present and future opportunities+threats and risks in the e#ternal environment and current andfuture strengths+ weaknesses and risks relating to thecompany'

5' Determine strategic options+ select those to $e pursued+ anddecide the means to implement and support them'

6' Determine the $usiness strategies and plans that underpin

the corporate strategy'

8' )nsure that the company4s organi,ational structure andcapa$ility are appropriate for implementing the chosen

strategies'

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c) Delegate to management-

3' Delegate authority to management+ and monitor andevaluate the implementation of policies+ strategies and$usiness plans'

5' Determine monitoring criteria to $e used $y the $oard'

6' )nsure that internal controls are e%ective'

8' Communicate with senior management'

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d) Exercise accountability to shareholders and beresponsible to relevant stakeholders-

3' )nsure that communications $oth to and from shareholdersand relevant stakeholders are e%ective'

5' 9nderstand and take into account the interests of

shareholders and relevant stakeholders'

6' :onitor relations with shareholders and relevant stakeholders$y gathering and evaluation of appropriate information'

8' Promote the goodwill and support of shareholders and

relevant stakeholders'

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e) Other roles-

3' Selecting+ compensating+ monitoring and+ when necessary+ replacingkey e#ecutives and overseeing succession planning'

5' "ligning key e#ecutive and $oard remuneration with the longer terminterests of the company and its shareholders'

6' )nsuring a formal and transparent $oard nomination and electionprocess'

8' :onitoring and managing potential con;icts of interest ofmanagement+ $oard :em$ers and shareholders+ including misuse ofcorporate assets and a$use in related party transactions'

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?here does the auditor

&t in@

 (he auditor does not have direct corporate governanceresponsi$ility $ut rather provides a check on the information

aspects of the governance system'

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"udit committee )#ternal auditor/nternal auditor

:anagement

-oard of directors

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"uditor>s 7ole in

Corporate GovernanceCorporate governance involves decision making+

accounta$ility+ and monitoring'

3' Decisions reAuire relevant and relia$le information'

5' "ccounta$ility involves measuring+ reporting+ andtransparency'

6' :onitoring involves systems and feed$ack'

."uditor>s primary role is to check whether the &nancial

information given to investors is relia$le'

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*$.ective of an audit

 (o e#press an e#pert opinion on the fairness with which

&nancial statements present+ in all material respects+ acompany>s &nancial position+ results of operations+ and cash;ows'

 (o $e a$le to e#press such an opinion+ the auditor muste#amine the &nancial statements and supporting recordsusing sound auditing techniAues'

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7ole of audit committee*versight of companies &nancial reporting process '

 (o recommend statutory auditor to -oard+ theirappointment+ re0appointment+ su$stitution or elimination+terms and amount of audit fees + approval for payment forany other services rendered $y statutory auditors'

 (o review Auarterly and annual &nancial statement with themanagement $efore put forwarded to the $oard forsanction'

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Contd' (o review the statement of usesB application of funds rose

through any issue and /P* proceedings'

 (o review performance of statutory and internal auditor andthe adeAuacy of internal control system and function'

 

Discussion with the internal auditor and any momentous

conclusion and follow up there on and review &nding of anyinternal investigations $y internal auditors where fraud andirregularity is suspected'

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7elationship $etween the -oard

and the "uditors (o meet its o$ligations to shareholders+ the $oard must

ensure that it receives relevant and relia$le information'

"uditor assists the $oard in achieving that goal'

 (here must $e open and frank dialogue $etween theauditors and the $oard'

"uditors must e#press+ to the $oard+ their view on theappropriateness ! not .ust the accepta$ility ! of theaccounting principles used or proposed to $e used+ and onthe transparency and completeness of the disclosures'

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7elationship $etween the "uditCommittee and the "uditors

"n e%ective audit committee is a vital component of ane%ective corporate governance system'

 (he "udit Committee and the "uditors need to maintain anongoing dialogue independent of management and the restof the $oard

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Conclusion (he role of the -oard in creating an environment where acorporation can succeed is the key to future success of the $usiness'/t is incum$ent upon the $oard to ensure that timely+ accurate andcomplete reports on all relevant aspects of the organi,ation are

issued to all stakeholders'

 (he role of audit committee and auditors in current scenario has

$ecome very crucial' /f a company has an active and strong auditcommittee then independent auditors> working will $e supported'"uditing committee and auditor should perform their role diligently

and ethically to secure interest of not only company and investors$ut all stakeholders'

 (his is possi$le when independent directors will have their ownweight and right to ask Auestions to management+ which in turn will

give strength to auditor to $e ethical'

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 (hank you