EXECUTIVE SUMMARY Audit Committee The global capital markets rely heavily on the quality of financial statements.

The economic crisis that started in 2008 increased the focus on both the role of the audit committee and the information companies disclose. The audit committees role in ensuring accurate and transparent disclosure is more important today than it has ever been. Clearly, the ob is also more difficult and challenging than ever!given increased e"pectations by shareholders, regulators, and other stakeholders# heightened scrutiny $hen things go $rong# more responsibility for risk management# and more focus on the need for fraud prevention. The bottom line is that people e"pect more from audit committees today, and this publication provides insight into audit committee leading practices that can help committees meet those e"pectations. %hat the pro ect cover &inancial 'eporting and (isclosures 'isk )anagement and the *ystem of +nternal Control Culture and Compliance ! The *oul of Corporate ,ccountability -versight of )anagement and +nternal ,udit 'elationship $ith ."ternal ,uditors %hat to (o %hen Things /o %rong ! &inancial *tatement .rrors and &raud +nvestigations Committee Composition )eetings *upporting Committee .ffectiveness ! Charter, .valuations, 'esources, and Training.

Corporate governance Corporate governance mechanisms differ as bet$een countries. The governance mechanism of each country is shaped by its political, economic and social history as also by its legal frame$ork. (espite the differences in shareholder philosophies across countries, good governance mechanisms need to be encouraged among all corporate and non!corporate entities. %hile multilateral organisations like the %orld 0ank and the ,sian (evelopment 0ank have evinced keen interest in the sub ect of corporate governance an effective lead has been given by the -.C( in evolving a set of cogent principles of corporate governance

$hich are internationally recognised to serve as good benchmarks. There have also been some $elcome initiatives by the stock e"changes in the 12 and the 1* in prescribing good governance practices to their listed companies. These initiatives have been especially in the area of audit committee of the board and appointment of truly independent directors to tone up the quality of board deliberations and performance. The ,dvisory /roup on Corporate /overnance has attempted to compare the status of corporate governance in +ndia vis!3!vis the internationally recognised best standards and has suggested a course of action to improve corporate governance standards in +ndia. /lobally, the process of convergence in corporate governance is gathering momentum due to gro$ing international integration of financial and product markets. &oreign investors and creditors are more comfortable in dealing $ith economic entities that adopt transparent and globally acceptable accounting and governance standards. Companies that embrace high disclosure and governance standards invariably command better premium in the market and are thus able to raise capital at lo$er costs. The predominant form of corporate governance in +ndia is much closer to the .ast ,sian 4insider model $here the promoters dominate governance in every possible $ay. +ndian corporates, $hich reflect the pure 4outsider model $ith $idely dispersed shareholdings and professional management control, are relatively small in number. , distinguishing feature of the +ndian (iaspora is the implicit acceptance that corporate entities belong to the 4founding families though they are not necessarily considered to be their private properties. .ven today, the concept of industrial house popularised some time ago by the (utt Committee and the )'T5 ,ct continues to be the commonly accepted reference points in most of the discussions on o$nership patterns of industrial6business units.