Swacch Bharat Abhiyan which means Clean India Mission was launched by our Honorable PM Shri Narendra Modi on 2nd October 2014. It was performed in remembrance of the words of the father of our Nation, Mahatma Gandhi. Launched with vigor and enthusiasm of unmatched energy, it caught the nerve of the nation. But, why do we need a mission to clean our country? After all, we already have so many institutions in place to take care of that! Why haven’t we achieved the desired results even after 67 years of independence? Well, the problem does not lie solely in the institution but majorly in the mindset of our people. We believe that it is the duty of government ONLY to clean our roads, railways, parks and other public places. We are kings in democracy and the so called “Public Servants” are our “Personal Servants”. We failed to realize that it is duty of every citizen of India to keep their surroundings and public places clean the same way we keep our home neat and tidy. Though lately, the outlook of people has started changing. Thanks to the globalization and increased number of Indians going abroad. In general, with noted exceptions, Indians lack of civic sense accompanied with insensitivity towards the dirtiness make the situation worse. Had we loved our country so passionately, the condition today would have been quite different. We serve our nation by not only fighting on borders, but small contributions like performing our rightful duty also make a big difference.
Right to dignified livelihood is our fundamental right. Our dream of becoming a super power is a myth if our fellow Indians live in unhygienic conditions. The biggest catch of the Swacch Bharat Abhiyan was to respect and save the dignity of women by ensuring that everyone has access to toilets. Open defecation is a blot on modern society. It is an irony that on one hand we have reached Mars and on the other hand our people are forced to ease off themselves in public. Sometimes it is by choice and at others it’s a necessity. It is said that Godess Lakshmi resides only in that house which is neat and clean. Perhaps, in mythological sense that explains why India is still a developing country.
Off lately, corporate sector has taken initiative in this area. It is a known fact that private sector is more competent and efficient as compared to the public sector. Now that they have started working in this direction as well, we are hopeful to see the desired results soon. Corporate offices are generally cleaner than their public counterparts. They provide more amenities such as clean, filtered drinking water, 24X7 electric supply, better toilet facilities etc. But is “Swacchta” only related to the physical cleanliness or is it something deeper? Well, we also need ethical cleanliness. We all talk about what we “should” do but more often than not our actions do not follow our words. Similarly, companies at times get deflected from their righteous path. This sector has not been untouched with corrupt practices. Satyam scam, 2G scam, Coalgate etc. are not unfamiliar names. In all these case and in many others, somewhere the greed for profits overcame the spirit of real professionalism. There should be an environment where healthy competition flourishes, which is beneficial to both the business house and the consumers. Unhealthy practices such as formation of cartels kills the spirit of competition.
Companies owe a part of their income to the society. Their generosity should not be determined by their political affiliation but by their desire to give back to the society in real sense. The real outcome of the efforts should be to benefit the society at large. The question that drives the business should be how is it going to benefit the poor and the marginalized? Will it anyway make their lives better? Will their tomorrow be better than today? Only those companies survive in long run that has a wide vision for the benefit of the society and not merely generating profits.
Public sector units score extremely low on good business practices. On the one hand corruption has spread like cancer in these institutions; on the other hand lethargic attitude of the workforce has paralyzed the entire machinery. There can be no doubt that people who take bribe to perform their duty are harming the nation but those who do not timely perform their tasks even if not taking consideration in return are equally guilty. Causing inconvenience to the customers is the biggest sin any organization can commit. Political interference in government owned enterprises cannot be ruled out. Such interference is not only detrimental to the organization but to the stakeholders as well. History has witnessed downfall of so many PSUs only due to wrongful, untimely and biased decisions by political persons largely driven by their personal gains.
The principle of governance has been in existence for centuries. Chanakya in his most celebrated book “Arthashastra” has stated four principles for governance. They are Raksha (protection), Vriddhi (enhancement), Palan (maintenance) and Yogakshema (safeguard). The same holds true in present times as well. He said that the power should not be concentrated in one hand and there should be checks at various levels to ensure the results are achieved undiluted. The humans are by their very nature susceptible to get swayed away by lucrative offers, and therefore workers at all levels, irrespective of their position in organization, should be made accountable and responsible for their actions.
The work of auditing the accounts and working of an organization has been entrusted on the shoulders of Chartered Accountants. Over the years we have been acting as the watchdog for millions of stakeholders. We act as their eyes and ears. The shareholders of the company place very high trust on the auditor’s report, which apparently shows the true and fair view of the accounts of the company. The auditor should perform their duties with extreme care and vigilance to ensure that there is no illegal or improper transaction. However, the recent Satyam scam and the role played by the auditors and audit committee have shaken the confidence that people place on the work of Chartered Accountants. The work of Chartered Accountants is like walking on the edge of the sword. They have to be independent to perform their work as well as maintain good relations with the management for their livelihood. It creates a potential situation for conflict of interest. Independence of auditors can be guaranteed only if the people appointing them are in no way attached to the management of the company. Hence, the role of Independent directors comes into picture. The shareholders of the company place very high trust on the auditor’s report, which apparently shows the true and fair view of the accounts of the company. The auditor should perform their duties with extreme care and vigilance to ensure that there is no illegal or improper transaction. (Harsh Gargani and Ritika Jhurani, 2009). Auditor independence would be safeguarded if audit committee were made up of a majority of independent and non – executive directors, and this might signify that their independent status would contribute to auditor’s independence through bridging communication network. (Zulkarnain Bin Muhamad Sori, Shamsher Mohamad and Mohd Saad. (2008). Knapp (1987) found that an audit committee if is more likely to support the auditor rather than the management in audit differences and the level of support is steady across members of the audit committee which will secure interest of shareholders too. The problem in Indian Corporate Sector is that of controlling the leading shareholders and safe guarding interest of minor shareholders, which can be solved by board of directors who are accountable to all stakeholders; it would make governance more easy (Jayant Rama Varma, 1997).
Shareholder’s value is enhanced by honest and transparent board of Directors. (Vepa Kamesam, 2006). Jyothi Dhawan identifies the role of board of directors in corporate governance, which inculcate a sense of accountability towards all stakeholders. The audit committee would search for the integrity and reliability of financial statement and reassure shareholders. (AICPA, 1967; Auerbach, 1973 and FCCG, 1999). The responsibility of audit committee in the area of corporate governance is to provide assurance that the corporation is in rational compliance with relevant laws and regulations, is conducting its affairs fairly, and is maintaining effective controls against employee conflict of interest and fraud.(Muhammad Faisal Siddiqui) An audit committee consisting independent directors can have control over management and thereby acting as a sort of assurance to the shareholders that they will have full disclosure of correct information. To have good corporate governance, audit committee needs resource persons to act as independent director on whose shoulder lies the responsibility to take the company in the right path, demand for more disclosures, transparency and accountability and performance standards for investors and lender and protection for shareholders. (Abhas). Right blend of audit committee members is the most significant decision to execute corporate governance successfully. Committee with qualified and committed members from all walks of life with knowledge on hand of the company’s business will be able to execute its tasks successfully. The capability of the audit committee to perform independently and raise questions to management will stimulate auditor to work efficiently and their fair performance will facilitate good corporate governance. (Zulkarnain Bin Muhamad Sori, Shamsher Mohamad, Mohd Sadd, 2008)One of the important duties of the Audit Committee is to review performance of statutory and internal auditor and to check the adequacy of internal control system and function. It also includes discussion with the internal auditor and any momentous conclusion and follow up there on and review finding of any internal investigations by internal auditors where fraud and irregularity is suspected. Any compromise either by the auditor or by the audit committee on their respective part prove detrimental to the interest of shareholders. As per Jawaher Al- Madhaki and P L Joshi (2004), concept of an auditing committee is not new in India but their development is slow and their constitution lacks independence. Auditing Committee functions are still intense in the traditional areas of accounting and their role is not varying fast enough to make the corporate governance more effective. Lam (1976) initiated that the manifestation of independence of the committee would boost auditors’ independence and improves transparency in financial reporting. The study shows that an audit committee with independent non – executive director strongly influences auditor’s sovereignty (Beattie et al.1999). Independent directors of audit committees are anticipated to boost the quality of monitoring because they are not associated with the company either as bureaucrats or human resources; thus they would act as the shareholders watchdog. Dezoort and Salterio (2001) and Raghunandan et al. (2001) revealed that audit committee that consist of qualified independent directors are better able to contribute towards auditor’s independence and audit will give true and correct picture of an organization which will guide shareholders and investing community.
Much more stress is placed on auditors in the perspective of corporate governance because in most of cases, auditors will be the first person to spot corporate abuse. This is due to the nature of auditing function and the purpose of auditing company accounts. It can also be a case of the only person who is aware of the misuse besides the wrongdoers. Thus, in many cases the auditors prefer to fall short to discover the wrongdoing at the expense of their duties and obligations. Auditor has to be bold enough to bring forth all the facts in his report and there should be no hesitation on his part in disclosing the defects, defaults, irregularities, discrepancies etc., even if the management of the company is involved in the same. He must perform his duties in right earnest and honestly. For the same, audit committee should monitor auditor’s performance. The audit committee should discuss various matters with the auditor related to their independence and what audit committee expects from auditor in interest of shareholders and other stakeholders except management. But it is not only expected from auditor to do his duties diligently but also audit committee should have guts to ask questions to management regarding any matter which is related to shareholders and investing community.The criteria for selection of member should be familiarity and knowledge of business, experience of holding similar positions and accounting and finance proficiency. But usually in India, board members are not selected but invited by corporate so that they can influence their decisions. The independent directors, who are playing role of guardians for shareholders and stakeholders, are in true sense not independent for any decision. Truly most of the independent directors are family members, friends, relatives or closely known so that they can negotiate and compromise with management. Auditors are appointed by board of directors (auditing committee) with an intention to carry out auditing in an impersonal, intentionally and professional manner. Auditor should be independent to secure interest of shareholders and stakeholders but when board of directors is not independent then how they can ensure auditor’s independence. Auditor’s independence is compromised due to close relationship between him and management. Many time management obliged auditors by extending non- audit services and earned their favor in presenting false financial statement. Auditor has to depend on management for their livelihood and they keep good relations with management. If they qualify the report or manage to spot the wrong doings of the management, itis doubtful that they will be appointed by the management in the future. The role of audit committee and auditors in current scenario become very crucial. Stakeholders expect loyalty and trust from auditor and auditing committee while resolving financial facts and exposing at all fraud and fault in organization. The audit committee member’s experience, relevant exposures, qualification background and in depth knowledge need to be highlighted and confirmed because if directors are experts, experienced, qualified, financial wizards, then they can have vision and foresightedness to protect stakeholders. If a company has an active and strong audit committee then independent auditors’ working will be supported. Further the system of selection and appointment of auditor on their quality and experience need to be explored. Over and above laws and regulations, being responsible professionals and representatives of shareholders and investing community, Auditing committee and auditor should perform their role diligently and ethically to secure interest of not only company and investors but all stakeholders. This is possible when independent directors will have their own weight and right to ask questions to management, which in turn will give strength to auditor to be ethical. (Sanjay Ruia)
Nevertheless, it is never too late to start afresh. Instead of complaining about the past we should concentrate on our present actions. Deeds of today determine the fruits of tomorrow. If today we take corrective actions, we undoubtedly make way for a brighter future. A stringent law along with effective implementation is the need of the hour to check the malpractices of the corporate sector, both public and private. But what is more important is self policing. Only if the character of the organization is strong, it can come out bright through rainy days. Good business practices are appreciated world over. It builds brand and reputation of the organization. It is easy to generate profits but difficult to build a name. Only when we grow together, we survive and succeed and not at the cost of each other. We all, irrespective of our trade, need to audit our thoughts and actions to clean our environment, both physical and mental. Only then, in true sense, we will achieve Swacch Bharat.
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Please share if you like it. Thank You!
Very well articulated. I completely agree with your view.
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