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SOX and Critical Analysis With Satyam Fraud 2

SOX and Critical Analysis With Satyam Fraud 2

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Sarbanes Oxley, SOX, Clause 49 vs SOX, Critical Analysis With Satyam Fraud 2
Sarbanes Oxley, SOX, Clause 49 vs SOX, Critical Analysis With Satyam Fraud 2

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Published by: Balaji.S (ACA) Srirangam on Jul 15, 2010
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08/07/2011

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SOX and
critical analysis with satyam fraud 2
http://www.caclubindia.com/articles/investor-protection-critical-analysis-with-satyam-fraud-2--3780.aspIn the previous article "INVESTOR PROTECTION : A critical analysis with satyam fraud ", Iemphasized the problem of the corporate frauds here I am making an attempt to suggest somesolutions and overall concluding the whole article as : -The three important issues for consideration in the Sat yam cases include the following:1. What is the role/responsibility of independent directors? Are they rubber stamps to affirmthe decisions already reached by the promoters or to examine the proposal before approval?2. Have the auditors exercised due diligence in performing audit?3. How do we check and prevent corporate frauds in future?It has been suggested that the Government should consider whether the reference of the differentcases in the scam to a special court may not serve the purpose in the event of a joint inquirythrough a single agency not being considered feasible on any grounds. The need for a specialcourt may arise after all investigation has been concluded and the stage for prosecution, etc.,arises, we are anxious meanwhile that all ideas on the following issues should be cleared in thecourse of the investigation:
Why did the Raju's come forward with a disclosure? What was their intention? Will theyget mitigation in punishment either in or outside India as a matter of legal right on thestrength of this disclosure?
Has there been any insider trading by the Raju's or anyone else connected with them?
 
Were the Raju's not accountable for the diminution in the promoters' holdings andcharges to which they were subjected by the loans taken by anyone on the security of the promoters' holdings?
What were the nature and extent of the diversions of funds from Sat yam to the Raju's or their concerns? Can they be retrieved, if necessary? If so how?
Is it true that the Raju's have houses ill different countries? If they own them; was the prior approval by the Reserve Bank required? If so, was such approval obtained? Fromwhere did the funds for the necessary investments come?
Should not the internal audit be a concern of an independents agency? If so how best canit be done?
It has been considered advisable to have supervisory audit? Who should undertake it andwhen? Should the regulatory authority have anything to do with it?
Since the credibility of independent directors has been damaged to some extent in therecent developments, how best can such directors be appointed? On what fees? On whatterms? Will all this call for any action on the part of the SEBI? '
Should Satyam be allowed to continue; it is, or should it be taken over by any interested party? What changes in law will the SEBI require in order to obviate the usual pricingand other problems which are attendant on such a takeover?SATYAM SCAM: WHAT LESSSONS WE LEARNTSatyam's fraud is a blot on India's corporate image despite the fact that India continues to rank high in its capabilities and competence in IT sector. The scandal has rocked India Inc and shakenthe confidence of thousands of retail investors in India and abroad.
 
It is a collective failure of directors, auditors and regulatory agencies in ensuring transparencyand accountability; As a consequence of this fiasco, the overseas client may take a hard look atmost Indian outsourcing companies and investment flows could be hit. The responsibility for  preventing fraudulent activities lies with the Board of directors. Their acts and conduct impactthe reputation of India and, therefore, they must ensure that the highest standards of corporategovernance are set.The Quality Review Board ('QRB'), an independent body set up under the MCA, is looking intothe standards of audit for chartered accountancy firms with a view to redefine new stringentnorms for audit firms. It may ask the SEBI and MCA to mandate listed companies to rotate their auditors to prevent Satyam-type frauds - practice being followed in public sector companies.Although the investor’s interest is saved as the Satyam is acquired by the Tech -mahindra andalso the mission had been accomplished of all the 6 directors, i.e, Kiran Karnik, Tarun Das,Deepak Parekh, TN Manoharan, S Mainak, and C Achuthan.It is now confirmed that Satyamwould be saved. Their reputations, too, stood burnished. Not that any of them wanted an eventsuch as Satyam to reoccur.But, there is impromptu need of time to take the investigation procedure in effective and efficientway to clear every issue and make it sure that such incident will not happen again in future, it isnecessary to solve the above questions and to fill the gaps of the loopholes. Also, these Issues to be cleared in the course of investigation Now, in next topic we will discuss about the present legal systems and provisions of other’scountries to deal with such frauds, an attempt is made to suggest the possible measures whichcan fill the gaps: - 
LEGAL PROVISIONS IN OTHER COUNTRIES TO DEAL THE CORPORATEFRAUDS.
For good corporate governance, Different countries have their own legal mechanism to act, butthe fraud and corruption practices act 1977, and Sarbanes and oxley act (SOX) of United statesraised widespread anxiety and concern over world for such corporate frauds. The detailedstructure of the acts are given as: -

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