Musings for a responsible society

Amidst the dark and grey shades increasingly engulfing, invading and piercing deeper and deeper, let me try to enjoy the little smiles, genuine greens, and the gentle breeze. Oh! Creator! If you don't exist, my vain!
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Frauds, Scams and a Corporate Lokpal

       Anna Hazare and his people’s movement against bureaucratic and political corruption gained massive support from the public from all walks of life in India. Along with bureaucratic and political corruption, the corporate corruption is also thriving worldwide.    

    It is a fact that high level political and bureaucratic corruptions are facilitated by a cross section of corporates. Almost all the major scams in various countries and particularly in India are through direct or indirect involvement of big business enterprises. Apart from the scams and frauds that are products of an unholy nexus of businessmen, bureaucrats and politicians, many companies, large and small, are marred by corruption within itself. This results in large scale diversion of funds and inefficiency which invariably affect the interest of all external stakeholders.

    Corporate corruption has further strengthened the parallel economy, by moving from the conventional practice of ‘black and white’ transactions to Special Purpose Vehicles and sub-contracts giving a colour of legitimacy to the deals. Such unethical practices have resulted into companies becoming bankrupt and investors losing quite heavily. 

   In an interview reportedly to the Press Trust of India, the Chief Vigilance Commissioner of India said that Corporates may be brought under the purview of Lokpal. However, an amendment proposed by opposition MPs in Indian Parliament to include corporates within the ambit of Lokpal was defeated during a special parliamentary session convened exclusively for passing the Lokpal Bill. At this juncture, one needs to think loudly for an effective watchdog to check corporate corruption.

  The market regulator Sebi has finally woken up to advocate for the expeditious creation of an independent audit regulator in India. The demand for such a regulator to oversee the audits has come in the backdrop of increasing awareness about the dwindling standards of corporate audits in the country.  The lack of effective disciplinary action by the Institute of Chartered Accountants of India (ICAI) has also prompted the regulatory bodies and others to think about the need for an independent regulator. Interestingly, but not certain whether it is an immediate reaction, the ICAI has reportedly barred two auditors of an Indian audit firm  from practicing for life and slapped a penalty of Rupees 5 lakhs each on them for their role in the 14000-crore Satyam scam. A probe by an ICAI disciplinary committee has found the above two chartered accountants guilty of professional misconduct while their firm conducted audits on behalf the PWC. The action of the ICAI came as a surprise for many as all along the statutory body maintained a position that what happened in Satyam is not an audit failure but a corporate governance failure. Be that it may, the series of corporate scams and scandals happening in the recent years point towards the deficiencies in the current audit system.
          Indian laws are not without any provisions to tackle offences by the auditors. The new Company’s Act provides for certain situations in which the auditors can be held responsible for negligence, incorrect statements etc.   Apart from the mechanisms of SEBI and Company Law Board, there are internal control mechanisms in the profession through ICAI. However such measures did not create any serious impact in the profession as the deterrence mechanism is very weak. The present powers and responsibilities of the audit committee are unlimited. Members of the Audit committees of many companies lack technical competence and fail in their role as an effective investigator and evaluator.

Auditor Independence’- Is it impossible in the current structure?

  Analysis of the corporate audits in India indicates that the auditor independence has been compromised due to several reasons as mentioned earlier. The problems lie in several areas: Appointment of auditors, payment of fee, audit and non-audit revenues, the threat of loss of contract, self interests, cultural and primordial preferences while appointing auditors, lack of technical competence, financial and non-financial relationships with the clients etc. Added to the above there are problems of lack of uniform and objective standards, disciplinary authority, over sight bodies etc. In the above circumstances it is necessary to think in the direction of making some radical changes.

Can we have an Independent Audit Regulatory Authority?

 As we seen in our discussion and review , there is a necessity for a strong  institution to oversee the entire audit work in the country. The set up should have certain necessary attributes. It should be independent, technically competent, representative, multi functional, and with sufficient legal powers. It may be headed by an Auditor General who is nominated by the President of India and should be a constitutional authority with a fixed tenure of at least 10 years. This would make them totally independent of the changing governments in the country. The post should be made constitutional and removal be made only through impeachment.

Following structure is suggested for the above authority. The structure consists of various autonomous boards with independent functions as given below.


(Reporting to President; Assisted by chairmen of the  following independent bodies)


(Power over both public and private sector without any differential treatment; Chairmen of following independent bodies are members, fixed tenure)
(Responsible for formulating and amending standards)

(oversight board which reviews the audit work and conduct inspections)
Enquiries on misconduct of auditors,
Initiation of disciplinary  proceedings, and
(Separate entities for each functions)

Centralized empanelment of auditors –specialization wise and region wise based on set criteria.
Allocation through random allotment from a list of ten preferences given by the client as well as the audit firm) Appointment for 5 years without any extension.


Dealing with grievances on Standards, procedures, reviews, inspection, auditor allocation , disciplinary proceedings etc)

But appeals against disciplinary action imposed lies only with Audit board

           As seen above, the independent body can oversee streamlining of the accounting standards. Though ICAI has been successfully involved in the preparation of accounting standards, lately arguments have emerged questioning the ‘objectivity’ and ‘independence’ of the ICAI. The role given to ICAI was only for a limited period till such time the central government constitutes an autonomous body to prepare the standards. Since most of the problems related to ‘auditors independence’ is because of the current system of appointment of auditors, the independent authority can be in charge of empanelment and allocation of auditors. As we entered the phase of competitive business management there should not be any distinction between the standards for private sector and public sector. Both should be under the purview of this structure.

 Suggestion for National  Audit Fund

   It is seen that the independence of auditors are affected because of their dependence on the clients for fee. Therefore a National Audit Fund can be created to take care of the auditing expenditure. The entire expenditure for auditing (the audit fee and other audit expenditure for the auditors) should be borne by the Auditor General Office. Fund can be raised through one or all of the following sources: a) Portion of annual fee by companies, b) A very small portion of the investment of each investor c) a fee proportionate to their annual turnover, and d) Amounts collected as penalties and fines.


  The public responsibility of auditors as watchdog of companies is very crucial for overall stability and financial discipline in the economy and business. Most of the corporate failures in India and abroad pointed out the ‘audit failures’ in many companies. It is seen that the independence of auditors are under serious threat due to several factors. There is a need for an independent authority to effectively regulate and enforce the audit system in India. The authority should be totally independent of the government and would have uniform standards for both public and private sector. However no authority can be a panacea unless companies and audit firms understand that internal control, personal competency and ethics play crucial role in making the institution more efficient and socially productive.

You may also like to read Satyam: A case of worst audit failure


No privacy anymore? A critical look at Google’s new Privacy Policy

Sibichen K Mathew

   An ideal person need not worry about his privacy, because he is not bothered about someone else becoming privy to his personal data and interests. But all human beings are not ideal persons. And, therefore our society is also not an ideal society. People crave for data and information about others for various reasons. And there are individuals and groups who use the information for criminal activities.  In such a scenario, one needs to be guarded about his personal data and preferences.

     Internet has facilitated faster, cheaper and sophisticated modes of sharing of information and entertainment. But all these are at the cost of privacy. Commercial interests of the service providers overtake the interests of the users in due course.  As the domestic and international rules and procedures related to internet lack lucidity   and perfection, users are in a disadvantageous position to understand the negative impact.

     Google  is almost synonymous with internet for millions of people. Many are not aware that every action in the net are tracked, stored and probably shared with others. Google has notified its new Privacy Policy  which will be effective from 1st March 2012. Here is an attempt to critically examine privacy issues in the net and the new Privacy Policy of Google.

   Google is one of the most favourite internet destinations for all net users. Google offers a host of services under its umbrella such as web search, mail, photo sharing, groups etc. One can search and contribute content, and communicate each other through Google platform. As millions of people use Google services to communicate and transact, it is necessary to ensure high standards of data protection and confidentiality.

 Privacy at risk?

We need to be aware of the following:

1.   Whatever data entered by us in the net are captured and stored by the search engine along with our identity
2.    The personal information we provide while opening a mail account or any other service is shared across various Google services and affiliated commercial and non-commercial services, directly or indirectly. Google would also associate our device identifiers or phone numbers with our Google account
3.       Our search queries are recorded
4.     Telephony log information like our phone number, calling party  number, forwarding numbers, time, date and duration of calls, SMS routing information and type of calls – all are tracked and recorded.
5.       Google can collect and process information about our actual location, like GPS signals sent from cell phones and other wireless devices. Google may also use various technologies to identify the location with the help of nearby Wi-Fi access points and cell towers.
6.    Google may also store information in our own systems (through web storage and application data caches)
7.      Like any other search engine or websites, Google also sends cookies or anonymous identifiers to our device
8.       Pixel tags are placed within the body of an email for the purpose of tracking our online  activities
9.       The reason given by Google for collecting all above information is ‘to provide, maintain, protect and improve’ the services and ‘to protect Google and its users’
10.    Google automatically combines the personal information given by us in one service with information in any other Google service and shares them with people we know
11.   Even after we delete information, Google may not immediately delete residual copies from their  active servers and may not remove information from their backup systems.
12.  Google will share personal information with companies, organizations or individuals outside of Google
13.   If our Google account is managed for us by a domain administrator (for example, for Google Apps users) then the domain administrator and resellers who provide user support will have access to our Google account information (including our email and other data). The domain administrator can also restrict our facility to delete or edit information or privacy settings.
14.   As per the Google’s policy, ‘it can provide our personal information to all the Google’s affiliates or other trusted businesses or persons to process it’ for Google, on a request by Google.

What precautions you should take to protect yourself?

Though you can’t totally prevent using or misusing your data or information or preferences by third parties, you need to take some precautions while online
  1.   You should turn off the location identifier
  2.  Avoid logging in to the Google account if you do not want Google to share your data across all  Google services. You can log into specific Google services independently
  3.  Don’t give consent by default for combining Double Click cookie information with personally identifiable information.
  4.   Set your browser to block all cookies, including cookies associated with the Google services. You can also activate the option to notify to you when a cookie is set by Google.
  5.  Many times, when you click ‘No’ to the question ‘enable cookies?’, you may get a message that  ‘the images will not be displayed’ or  ‘files cannot be downloaded’. You need to exercise the option wisely. Google track your preferences through cookies. Is it necessary to have personalized  search experience at the cost of privacy? In any case, you should periodically delete the cookies from your system.
  6. You should opt out of advertising services unless you really need them. For that, you can edit your preferences in Ads Preference Manager in Google
  7. You should  review and control the preferences through the Google editor
  8. You should not give consent by default to Google to share personal information to third parties
  9. Use ‘incognito’ mode on the Google chrome browser for privacy

  Following address has been notified by Google to contact to know about the privacy issues and to register complaints:
       Privacy Matters, c/o Google Inc., 1600 Ambhitheatre Parkway, Mountain View, California, 94043

In following cases, selective sharing of information can be acceptable
  • a)      In the interest of  security and law enforcement
Google Privacy Policy provide for disclosure of information to meet applicable law, regulation, legal process or enforceable government request. (There is a specific tool in Google for Government agencies to request information for criminal investigation)
  • b)      To address issues related to fraud, or harm on Google  and its users

What will happen to our data stored by Google, if it collaborates with another company or enterprise?

Google is silent on the above. It just says that if it is involved in a merger, acquisition, or asset sale, and if our stored personal data is transferred, then Google will give notice to the affected parties. There is lack of clarity in this.

How Google will ensure non-disclosure of our data and prevent sharing of information to third parties by its own employees, contractors and agents?

Google says the access to personal information of users will be restricted to Google employees, contractors and agents and are subjected to ‘strict contractual confidentiality obligations and may be disciplined or terminated they fail to meet these obligations’. It is not known what mechanism Google has established to detect such violations (before the user becomes aware of leakage of information pertaining to him). Google also needs to disclose to the internet community, number of such violations detected in the past and action taken.

Google should demonstrate its commitment to protect privacy

One should appreciate Google’s effort to make its new Privacy Policy public. But the new policy has created more apprehensions among the internet users. Google needs to be not only accountable but also demonstrate its accountability before the online community by safeguarding the rights and interests of its users. In fact, Google should be the torchbearer of ethical practices in the internet world. This can happen only through bold initiatives that are beyond its commercial interests. Google’s attempt to monopolize the internet world is evident as it is trying hard to provide social networking services that are offered by facebook and twitter in its own platform. Whether the aim is to track the advertisement preferences of android users or to increase its revenue by placing appropriate commercials , Google should not forget one hard fact. In this highly technological era, it won’t require much time for developers to create a new platform or users to find what they want elsewhere. 

Tail Piece
I searched Google (without logging in) to check the availability of air ticket from Bangalore to Thiruvanathapuram and clicked search results (including that of Indigo Airlines and Air India), just before writing this article. I switched off the laptop, had an hour of afternoon nap, went for shopping, and had a long evening walk. After dinner, I started browsing Washington Post . Do you know, what was the advertisement that popped up on that site? “Fly from Bangalore to Thiruvanathapuram at the lowest airfares. Book Now”. Should I be happy to have an online well wisher who is very concerned about me? Or should I get irritated over the overzealous uninvited cookies that track my interests and preferences? Yes, I was not very happy for the unsolicited assistance. Because I am yet to become an ideal man and the society I live is yet to become an ideal society!

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Your comments on online privacy are welcome!


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