The Hindu Business Line : Audit committees need to be hot on the scent

STORY so far: There is the thick fog of politics that shrouds most of the institutionalised innovation efforts, which is why it could often be easier to bridge digital divides than cross the ego divides. Knowledge Management initiatives too are bound to meet with such barriers to sharing, I muse.

At a presentation by Chandru for the branch finance heads, when participants speak about their problems, a suspicion surfaces of a major fraud that could be happening in the bills that one of the Kochi contractors has been submitting.

Episode 32

For long before all the current debate on audit committees, there has been one such group in the company. Company law prescribes every public company having paid-up capital of not less than Rs 5 crore to constitute a committee of the Board knows as "audit committee".

The change being mooted by the new Bill is in the composition. So, if the proposal became law, members of the committee would be drawn from independent directors.

On this, we were on a strong wicket because the committee benefited from the inputs of directors who were not fettered by routine admin problems. The members of the audit committee shall exercise such powers and perform such functions as may be prescribed, says the Bill, but the brief of the committee in my company was already laid out, and that included investigation into suspected frauds.

Soon after the branch finance heads meet, Chandru met the boss with Tony in tow, to lay out the plan of action.

"How strong is your suspicion?" asked the boss of Tony.

"Sir, I have been studying the contractor's bills for the last about six months," replied Tony. "And there are marked variations in the input-output ratios and other measures."

"Have you keeping silent all these days?" Bosses don't like surprises, you see.

"No, sir," Tony said. "I didn't want to cry wolf, too early. Moreover, I was trying to eliminate possibilities of errors."

"I agree, Tony," boss said, "that the line dividing frauds and errors is too thin.

Yet, I am only keen that signals travel fast from the operations level to the top, from the branches to the HQ, from you to Chandru, so that we put the outside entity such as the suspect-contractor on a watchlist."

"Sir, I have drafted a policy," said Chandru, "for whistleblowing. I sent it to you over the Intranet mail, an hour back."

"Yes," acknowledged the boss, being fairly current with his inbox. "I sent it to the audit committee chairman, Oswal Omega, for his views.

********

A few hours later, there was an important meeting with the boss. Gupta and Chandru were present already, when I walked in with Balu, the chief internal auditor.

"I am having the audit committee members hold a chat over the company's Intranet," said the boss, clicking the optical mouse that glided smoothly over the table.

"Hi, this is Balla," reported Ballahuddin, from his country home in Pune. "Is Oswal in?"

"Yes, coming," typed in Oswal from Punjab. "Who's missing, yet?"

"Ji, saheb," wrote Patel Babu, from somewhere in the corridors of power, and entering the chat room.

"I call the meeting to order," came the words from Oswal, and we fell silent. "Are you there, Mr CEO?"

"Very much," typed the boss, marking his presence.

"Despatch a team immediately to go and study the problem in depth," advised Oswal.

"I agree," said Balla bhai. "Don't waste time, and rush in the report within... "

"48 hours," wrote Patel. "And who is in the team?"

"I can send Gupta, Chandru, Balu and Swati," typed the boss, and looked at all of us. We all nodded, and he waved a `thanks' before launching the line over the Net.

*******

We took the fastest car from the company stable and drove to the main site where the Kochi contractor was working. It was a long journey and we took turns at the wheel. What made the travel bearable were the advanced suspension systems and air conditioning, plus the music and a spirited debate on how the fraud could have gone undetected so long. Yet when fatigue level set in, we parked the car at a Punjabi dhaba to get some soft drink.

Over cans and bottles, we were continuing our chatter, with Gupta talking about frauds that are too common in production scenarios, Balu on how ratio analysis could help catch the deepest-laid frauds, and Chandru on some of the international contours of fraud. I could spot a familiar face inside the dhaba, a sardarji who was making rotis.

swati_CA@hotmail.com

(To be continued)

swati_CA@hotmail.com

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