Post on 23-Dec-2015
transcript
Ethics in FinanceEthics in Finance
Presented by- Nikhil Jamnare Roll No.19 Pranav Soman Roll No.53 Vijaykumar Pammi Roll No. 35 Hardik Sampat Roll No.45 Ashesh Joshi Roll No.21
Group Group No.04No.04
Characteristics of Characteristics of Management Prone to FraudManagement Prone to Fraud
Unduly aggressive financial TargetsDomination by person or group
without controlsAggressive accounting practice to
keep stock prices highPressure to reduce tax liabilitiesMajor performance related
compensationNon-Financial personnel involved in
accounting matters
Ethical issues in FinanceEthical issues in Finance
Financial statements
Financial Markets◦Insider Trading
Hostile Takeovers
Fraud in Financial Fraud in Financial StatementsStatementsFictitious RevenuesConcealed Liabilities and ExpensesFraudulent Asset ValuationsImproper or Fraudulent Disclosures or OmissionsCreative accounting – form of fraudulent financial reporting so as to provide misleading information.
Duties of an AuditorDuties of an Auditor
To give an accurate statement to the members about the state of affairs of a company
To meet the objectives of the Companies Act 1985 and also the Articles of Association
To be reasonably skillful and careful in identifying the true nature of the accounts
Ethical AuditEthical Audit
An audit that assess a business’s structures, procedures, systems and policies.
It measures the extent to which the activities of a business comply with the standards it has publicly declared to its external customers
It measures business conduct against varied moral standards of the community.
Objectives of Ethical AuditObjectives of Ethical AuditTo provide a critical assessment of functioning of business
To investigate into acquisition or restructuring operations
To determine the type of training necessary for employees
To establish ethical conduct of business
To enhance, measure and promote the quality that increases business performance by assessing them against the ethical business objective
To improve the quality of governance by evaluating the performance and ensuring that financial information is both available and reliable
Ethical Issues in Financial Ethical Issues in Financial MarketsMarkets
Deception: act of misrepresenting relevant information
Churning: Excessive or inappropriate trading for clients account by a broker who has control over the account with intent to generate commissions rather than to benefit client
Unsuitability Unfairness in Markets
Insider TradingInsider TradingRefers to trading on price sensitive information by company employees or individuals closely connected with the firm
This information has not been disclosed to other market participants
Ethics & Insider TradingEthics & Insider Trading
It violates equality of opportunityDoes not give a level playing field between insiders and outsiders
Might harm exchange as a whole because investors might not be willing to trade on exchange that does not give shareholders their rights.
Hostile TakeoversHostile TakeoversAre those that elicit opposition
from the boards or employees of Target company
Reasons for opposition are as follows: Disagreements over price Protecting their own interests
NSEL CRISISNSEL CRISIS
Joint Venture between FTIL & NAFEDCommencement – 15th OCT’2008H.O.:MUMBAI5600 crore rupees scam!!!An outreach in 16 states trading in 52 commoditiesWhat triggered the scam?Permission to retread without taking delivery of goods
WHAT WENT WRONG?WHAT WENT WRONG?
31st July 2013 NSEL was stopped from carrying out new contractsInvestors protested on 28th august 2013Filing of FIR by PANKAJ RAMNARESH SARAF Against NSELAction by economic offence wing
Police arrest of MD ANJANI SINHA ,ASSISSTANT VICE PRESIDENT AMIT MUKHERJEE & other borrowersAttachment of property of defaultersFudging of documents by NSEL officials
FURTHER STEPSFURTHER STEPS
EFFECTS OF THE SCAMEFFECTS OF THE SCAMDerailing of the commodity marketErosion of investor confidenceLiquidation by Retail & Institutional players
ScandalYear
Reported
INR value
Location People involved Summary
Saradha Group financial scandal
2013 30,000 West BengalMamata Banerjee, Mukul Roy,Madan
Mitra, Kunal Ghosh, Srinjoy Bose, Sudipto Sen and many more
Ponzi Scheme(Fraudulent Investment) – 200 private companies
Indian Coal allocation scam
2012 185591 National
Comptroller and Auditor General of India, the coal ministry, many electricity boards and private
companies
coal blocks allotted, not auctioned
Uttar Pradesh NRHM scam
2012 10000 Uttar Pradesh Mayawati, Babu Singh Kushwahasiphoned off a massive sum estimated
at 100 billion (US$1.6 billion)
2G scam 2008 176,000 NationalNira Radia, A. Raja, M. K. Kanimozhi,
many telecommunications companiescommunication bandwidth auctioned
for lower than market value.
Uttar Pradesh food grain scam
2003 35000 Uttar Pradesh Mulayam Singh Yadav, MayawatiFood which the government purchased to give to the poor was instead sold on
the open market
List of Big scams in IndiaList of Big scams in India
Speak AsiaSpeak Asia
Promoter : Sumiran Pal & two other masterminds
Affects – 2.4 million Indians
Scam amount – 2200 crore
Scam – Getting investment by conducting marketing research in the name of big companies
Thank you