Skip to main content

Sebi allows bourses to conduct forensic audit

Sebi allows bourses to conduct forensic audit
The logo of the Securities and Exchange Board of India (Sebi) is pictured on the premises of its headquarters in Mumbai. 
The Securities and Exchange Board of India (Sebi) has empowered stock exchanges to conduct forensic audits on listed companies which seem dubious, being suspected of  use as conduits for illicit fund flow.
An authorisation letter in this regard has been issued to the bourses. The latter may take action in this regard on their own initiative. Sources say this is a sequel to the discussion between Sebi's surveillance department and the exchanges, on ways to curb such manipulation.
The regulator wants exchanges to review suspect companies on a weekly basis and select those for forensic audit. Till now, the exchanges did not have the authority to order this type of audit on their own.
A forensic audit is similar to a regular audit of a company's financial statement. However, the mode of examination or evaluation of the details are more specific. The attempt is to capture all related trails and transactions of a specific period when a fraud is suspected to have taken place.
The plan as approved is for an exchange to direct a company to send the auditor's certificate, with a list of disclosures. These include annual income tax returns for three years and description of pending tax disputes, if any. Further, status reports on compliance with the Companies Act and Sebi's listing regulations.
The exchange would then review their business models - whether or not it was doing well. Along with bank statements of the specific period when a possible fraud took place and the annual returns of three years.
"The details will be provided to the forensic auditors and accordingly they would scrutinise the data," said an exchange official. "Typically, exchanges have no say in the daily operation of listed companies. It comes to our notice when regulators raise red flags against such cases. So far, our action has been limited to coordination with the regulator."
The official added that it would be challenging for them to fulfil the new obligation. The move comes after Sebi was criticised for barring 331 "suspected shell companies" without conducting detailed background checks. At present, the exchanges are in the process of appointing experts to conduct forensic audits on at least 90 of this list of 331. The latter's list was provided by the ministry of corporate affairs in early August.
Sebi had barred all these companies from daily trading, though some got partial relief from the Securities and Appellate Tribunal. The action on these 331 companies was taken after a spike in trade was found during demonetisation. Many were reported to have been found to be violating the regulatory and income tax rules.
The Business Standard, New Delhi, 22th September 2017


Popular posts from this blog

RBI rushes in to prop up falling rupee

RBI rushes in to prop up falling rupee India’s central bank reportedly intervened in the currency markets on Monday to prevent a further slide in the local unit, which breached the 67 mark to a dollar for the first time in 15 months amid a widening trade gap and runaway import bills fuelled by high crude-oil prices. Some state-owned banks were seen selling dollars aggressively, interventions that market dealers attributed to the central bank’s strategy to stem the decline of the Indian rupee against the US currency. The rupee is the worst performing among a dozen Asian monetary units in the past three months. It lost 4.25 per cent to the dollar during the period, show data from Bloomberg. On Monday, the Reserve Bank of India (RBI) is said to have sold about Rs 800 million collectively on the spot and exchange traded futures markets, dealers said. An email sent to RBI remained unanswered until the publication of this report. The currency market has seen such a strong central bank interven…

GST Refund of Rs 20,000 Cr Pending: Exporters’ Body

GST Refund of Rs  20,000 Cr Pending: Exporters’ Body Refund of over Rs 20,000 crore on account of Goods and Services Tax (GST) is pending with the government with more than half the amount stuck as input tax credit, Federation of Indian Export Organisations said on Tuesday. While claims over Rs7,000 crore were cleared in March, the amount was Rs 1,000 crore in April.However, after exporters’ request, the GST council and tax department are organizing a second phase of Special Refund Fortnight starting May 31, which will enable exporters to draw their refunds at a speedy pace. Many exporters have been unable to file the refund of input tax credit due to technical glitches, exports and claim happened in different months. The major challenge lies on ITC refund especially because the process is partly electronic and partly manual which is cumbersome and add to the transaction cost, the exporters’ body said. On IGST, refunds are getting delayed due to airline and shipping companies not submitt…

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…