Revamping the Existing Code for Internal Auditors: A Necessity for Better Governance.

Abstract

The role of internal auditors is vital for the successful governance of companies. The scope of auditor's responsibility has increased in this age of corporate governance. This has been due to the increase in the magnitude of operations of the corporations. Informed shareholders, an efficient regulator and numerous regulatory requirements all sharply escalate the probable liabilities faced by the Auditor's of the company. Auditors play an important role as regards the disclosure of financial information with respect to every phase of working of a company. This financial information influences all the investment decisions of the company. The auditor has an obligation to present the financial statements as per SEBI requirements and other statutory guidelines. Certifying the compliance with corporate governance, certifying promoter's contribution etc., are other areas where the auditor's role is indispensable. Auditors have a critical role in checking financial malpractices by qualifications and effectively disclosing all germane financial information such as mis-utilisattion of funds. Further to ensure transparency in the entire mechanism the role of auditors is indispensable. Hence, the system of governance should be such that the auditors are efficient enough to perform their tasks to the maximum of their capabilities. In this article, we propose to analyse the responsibilities and liabilities of internal auditors in cases of financial scams and to formulate an ideal code for the working of auditors to prevent any lapse in the system. We aim to achieve this by identifying the loopholes in the present code and incorporating the regulations of different countries to evolve a foolproof system.