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Companies Act empower an ordinary shareholder to check the Books of accounts of a company at its registered office by paying a nominal fee। Again If minority of shareholders feel that majorities of shareholders’activities are causing opression and mismanagement in the conduct of business activities. Minority shareholders i.e. one ten in total number or one ten holding of share in terms of volume can write to Company Law Board (CLB). CLB after receiving the complain can take a necessary step to bring the justice .
Again the format of a company is more like a democratic structure ,where ordinary shareholders choose the statutory auditor of the company ।Statutory auditor is the external auditor unlike internal auditor .Internal auditors are the employee of the company and are on the payroll of the company.The statutory auditor are the group of the independent professional firm to whom fees are paid for rendering services. The duty of statutory auditor is to see that all the accounting and auditing principles are followed by the company or not. Whether the company has applied the raised public fund in those area for which it has taken .If auditor find any discrepancies in all these things ,he should “Qualify “ his report by pin pointing those errors. But he has to give an opportunity to the management under natural justice to defend himself .Here come the real problem ,no management would like that their mistake surface before the market ,government & shareholders.So they try to please the audit firms & auditors.
Apart from this there is another instrument by which management want to keep check on the auditor is that they can appoint another auditor in the next AGM. But here there is some defence available to outgoing auditors as incoming auditor has to seek the “no objection” certificate for outgoing auditor. During this time outgoing auditor can inform incoming auditor about the discrepancies existing in the books of accounts of the company. If the outgoing auditor is not satisfied with the behavior of incoming auditor ,he can launch a complain against his fellow member in ICAI .Proven guilty of professional misconduct ,action can be taken against incoming auditor & his firm.
There are lots of points in which if ordinary investor become interested they can put a check on these sort of financial fraud in the very begaining।All this can be done only if investor are made awared by the media & themselves. At the sametime investors have to curb their extra greed to become rich out of inflated price of shares. Very few investors are interested in the day to day fuctioning of management & company rather their sole object is to watch the rise in the price of stock & divided declared by the company and corner a huge profit out of selling their stocks. According to the newly elected President of ICAI Mr. Uttam Prakash Agarwal that an ordinary person can write to ICAI about the Balance Sheet and his signing auditor if he find any doubtful things into that.On receiving the complain ICAI’ s disciplinary committee will take necessary action.
Untill & unless investors rise from the their mental framework there is no point in blaming only the government & management because only the awareness of investor
Can put a check on these sorts of fraud.
