Need of Corporate Governance

Corporate governance is needed for the following reasons:

1. Separation of Ownership from Management:

A company is run by its managers. Corporate governance ensures that managers work in the best interests of corporate owners (shareholders).

2. Global Capital:

In today’s global world, global capital flows in markets which are well regulated and have high standards of efficiency and transparency. Good corporate governance gains credibility and trust of global market players.

3. Investor Protection:

Investors are educated and enlightened of their rights. They want their rights to be protected by companies in which they have invested money. Corporate governance is an important tool that protects investors’ interests by improving efficiency of corporate enterprises.

4. Foreign Investments:

Significant foreign institutional investment is taking place in India. These investors expect companies to adopt globally acceptable practices of corporate governance and well-developed capital markets. Demanding International Standards of corporate governance and greater professionalism in management of Indian corporates substantiates the need for good corporate governance.

5. Financial Reporting and Accountability:

Good corporate governance ensures sound, transparent and credible financial reporting and accountability to investors and lenders so that funds can be raised from capital markets.

6. Banks and Financial Institutions:

Banks and financial institutions give financial assistance to companies. They are interested in financial soundness of companies financed by them. This can be done through good corporate governance.

7. Globalization of Economy:

The economy today is globalized. Integration of India with the world economy demands that Indian industries should conform to the standards of international rules. Corporate governance helps in doing this.

Comments

Basic Principles Governing an Audit

SA- 200 describes the nine basic principles that govern the procedure of auditing. It lists out the roles and responsibilities of the auditor and his general code of conduct during an audit. 1] Integrity, Independence and Objectivity The auditor has to be honest while auditing, he cannot be favoring the organization. He must remain objective throughout the whole process, his integrity must not allow any malpractice. Another important principle is independence. So the auditor cannot have any interest in the organization he is auditing, which allows him to be independent and impartial at all times. 2] Confidentiality The auditor has access to a lot of sensitive financial information of the organization. It is important that he respect the confidential nature of such information and documents. He cannot disclose any sensitive information to any third party unless it is a requirement by law. And he must also be very careful with documents, certificates etc. that the organ...

Difference between Vouching , Verification and Valuation

Difference between Vouching , Verification and Valuation Vouching Verification Valuation Meaning Vouching is a process of comparing the entries in the books of accounts with the bonafide vouchers Verification is a process which proves the existence, ownership and title to the assets Valuation is a process which certifies the correct value of the assets and liabilities at the date of balance sheet. Subject Matter Vouching is made of the entries recorded in the books of original entry and their posting in the ledger Verification on the other hand is made of assets and liabilities appearing in the balance sheet at the end of the year Valuation is also made of assets and liabilities appearing in the balance sheet at the end of the year By whom Vouching is done by the senior auditor and audit clerks. Verification on the other hand is done by the auditor himself or his associates Verification on the other hand is done by the auditor himself or his associates When Vouching is done...

Banking and its Functions

Banking is an industry that handles cash credit and other financial transactions. Banks provide a safe place to store extra cash and credit. Banking can be defined as the business activity of accepting and safeguarding money owned by other individuals and entities, and then lending out this money in order to earn profit. Sec. 5(b) of The Banking Companies Act of 1949 , defines a banking company as “accepting for the purpose of lending or investment of deposit money from the public, repayable on demand or otherwise and withdrawable by cheque, drafts, order or otherwise”. According to Walter Leaf , “ A bank is a person or corporation which holds itself out to receive from the public, deposits payable on demand by cheque.” Thus, banks are a business of accepting deposits and lending money. It is carried out by financial intermediaries, which performs the function of safeguarding deposits and providing loans to the public. Functions of Commercial Banks: Modern commercial bank...

Wocop

Search This Blog