Naresh Chandra Committee Report and data

Ethical standards

2. While SEBI was making efforts to introduce corporate
governance standards among Indian corporates, the
Department of Company Affairs (DCA), took an initiative
in this direction by forming NareshChandra Committee.
It was appointed as a high level committee to examine
various CG issues.
Formed by DCA on 21 August ,2002

3. 1-DisqualificationsforAuditassignments
a)Prohibitionofanydirectfinancialinterest
b)Prohibitionofreceivinganyloan/guarantee
c)Prohibitionofpersonalrelationships
e)Prohibitionofunduedependenceonanauditclient

4. 2-ListofProhibitednon-auditServices
a)Accountingandbook-keepingservices
b)Internalauditservices
c)Financialinformationsystemsdesignandimplementation
d)Actuarialservices
e)Broker,dealer,investmentadvisor
f)Outsourcedfinancialservices
g)Managementfunctions
h)Anyformofstaffrequirement
I)Valuationservices.

5. 3-IndependencestandardsforconsultingandotherEntitles
thatareaffiliatedtoAuditFirms
4-compulsoryrotationofauditpartners(asinSOXAct)
5-AuditorsdisclosureofContingentLiabilities
6-ManagementcertificationintheeventofAuditor’s
replacement
7-Auditor’sannualcertificationofindependence

6. 9-AppointmentofAuditors
10-CEOandCFOcertificationofannualaudited
accounts
11-TRAININGOFDIRECTORS
Needbasedtraining
Undertakingfromeverydirectorfordischarging
theirresponsibilitiestothebestoftheirabilities.
12.Auditor-companyrelationship
13.Establishmentofcorporateseriousfraudoffice

7. Thecommitteehasfurtherrecommendedthefollowing:
Theauditorsshouldbeaskedtomakeanarrayofdisclosures
CallinguponCEOs&CFOsofalllistedcompaniestocertify
theircompaniesannualaccounts
SettingupofqualityreviewboardsbyInstituteofChartered
AccountantsofIndia(ICAI),InstituteofCompanySecretaries
ofIndiaetc

8. NareshChandracommitteereporton‘CorporateAudit&
Governance’hastakenforwardtherecommendationsofthe
KumarMangalamBirlaCommitteeonCGwhichwassetup
bySEBIonthefollowingtwocounts:
Representationofindependentdirector’sonacompany’s
board(halfmemberasindependentdirectors,irrespectiveof
chairmanbeingexecutiveandnonexecutive)
Thecompositionofauditcommittee(allindependentinstead
of2)

9. TheNareshChandracommitteehaslaiddownstringentguidelines
definingtherelationshipbetweentheauditors&theirclients.
AnAuditfirmshouldnotderivemorethan25%ofitsbusinessfrom
asinglecorporateclient
Thecommitteestressedthattheauditpartners&atleast50%ofthe
auditteamworkingontheaccountsofacompanyneedtoberotated
onceevery5years