Investment Valuation in India

The importance of internal audit has been well acknowledged in Companies (Auditor Report) Order, 2003 (CARO 2003), pursuant to which auditor of a company is required to comment on the fact that the internal audit system of the company is commensurate with the nature and size of the company’s operations. However, CARO 2003 did not mandate that an internal audit should be conducted by the internal auditor of the company. CARO 2003 acknowledged that an internal audit can be conducted by an individual who is not in appointment by the company. The 2013 Act now moves a step forward and mandates the appointment of an internal auditor who shall either be a chartered accountant (CA) or a cost accountant (CMA), or such other professional as may be decided by the Board to conduct internal audit of the functions and activities of the company. The class or classes of companies which shall be required to mandatorily appoint an internal auditor as per the draft ...

Accounting Impact From an accounting perspective, the focus in the United States has been on: • Convergence • Moving from rules-based standards to principles-based standards • Trending away from recording assets and liabilities at historical cost and moving to fair value. Convergence With the global environment in which companies operate, the FASB and the International Accounting Standards Board ("IASB") have dedicated themselves to improve financial reporting by evaluating the differences between US GAAP and IFRS and reducing those differences where possible. The two bodies are currently in the short-term phase of a longer-term convergence project. The goal of the short-term project is to reduce a variety of differences between US GAAP and IFRS. The short-term projects are those where significant differences do not exist and the Boards believe that they can reach agreement without a major overhaul of the current requirements. In addition to the convergence project, the ...

International Impact of SOX Foreign Private Issuers ("FPIs") registered on US Exchanges must comply with the Act in the same manner in which a US company does, with limited exceptions. The Act introduced additional requirements that many foreign companies did not anticipate when first deciding to enter US capital markets. As a result of these and other environmental changes, the direct and indirect costs of being an SEC registrant have increased and some foreign companies are reconsidering the US capital markets as a place to raise capital. Additionally, the PCAOB regulates the non-US auditors who have clients that are listed on an exchange in the US and registered with the SEC. This makes the non- US audit firms subject to the regulatory requirements, inspection process, and penalties dictated by the PCAOB. In response to the increase compliance costs, in March 2007, the SEC finalized rules allowing Foreign Private Issuers to deregister with the SEC if they meet certain ...

Sarbonex Oxley Act (SOX) or Investor Protection Act 2002 The Act was written by Senator Paul Sarbanes and Congressman Michael Oxley and enacted by the Congress of the United States in response to corporate management, accounting, and reporting scandals. The Act has heightened the role of regulation within the accounting industry and with it the role of the US Securities and Exchange Commission ("SEC") and the newly created Public Company Accounting Oversight Board ("PCAOB") in that regulatory process. The Act represents the biggest change in the US corporate governance and reporting since the federal securities laws were first enacted in 1933 and 1934. The Act has required the SEC to issue more regulations within six months than the SEC had ever issued before in a similar period. Among other things, the Sarbanes-Oxley Act establishes new or enhanced standards for corporate accountability and has increased penalties for corporate wrongdoing for SEC registrants. The S...