Subject: - Law , Ethics and management

BBA Sem- V

(EXTRA QUESTIONS)

Q.1Ethic of management accountant profession. OR ffundamental and

ethical principles of a professional accountant:

The IMA Statement of Ethical Professional Practice has been revered as the central code of ethics for
management accountants.
1. Competence
 Maintain an appropriate level of professional expertise by continually developing knowledge and skills.
 Perform professional duties in accordance with relevant laws, regulations, and technical standards.
 Provide decision support information and recommendations that are accurate, clear, concise, and
timely.
 Recognize and communicate professional limitations or other constraints that would preclude
responsible judgment or successful performance of an activity.
 Being a professional accountant it is his moral and ethical responsibility to provide better service
to his client as well as to the employer. So it is desirable for a professional accountant to be
update in professional knowledge and skill. This competency ensures that the client and the
employer can able to get competent professional service. A professional accountant should be
well versed with current legislation and technique. He has to work according to updated
professional standards. Competent professional service ensures a professional accountant to
exercise social judgment by applying professional skill and knowledge in performance.
 Professional competence has been divided in two categories.
 (A) ATTAINMENT OF PROFESSIONAL COMPETENCE:
It refers to a process where the professional accountant is required to attain regular awareness and
understand relevant technical professional development technique. This can enable a professional
accountant to perform efficiently within the professional environment.
 (B) MAINTENCE OF PROFESSIONAL COMPETENCE:

Prof. Snehal Sunil Darji, Sheth Shree K. J. Patel BBA College ,Kadi Page 1
 A professional accountant should not only attain professional competency but also maintain it
perfectly for his clients and employer. He should ensure that those who are working under him must
have appropriate knowledge and expertise. A professional accountant should know his limitations
while rendering professional services for clients and the employer.
2. Confidentiality
This is one of the important principles of a professional accountant. This is an obligation with a professional
accountant to protect the confidentiality of profession as well as business relationship. It is not desirable on the
part of a professional accountant to disclose any information to any of the third party. When there is a legal
compulsion the information relating to business can be disclosed to the third party. The business information
should not be misused for personal gain of a professional accountant. The professional accountant should
maintain confidentiality even in social environment. He should be alert for possible discloser of information in
situations like long association of with the business or a close associate of immediate family member. It is not
obligatory on the part of a professional accountant to disclose the business information unless it is permitted by
law. The professional accountant should consider the following points while he desires to disclose business
information to the public.
(A) If the interest of the parties cannot be affected or harmed by disclosing the business information.
(B) When the relevant information is known and substantiated by the parties of information with relevant facts
and figure.
(C) While communicating the information the professional accountant is satisfied that the information is meant to
the appropriate person for whom it is addressed.
3. Integrity
 Mitigate actual conflicts of interest; regularly communicate with business associates to avoid apparent
conflicts of interest. Advise all parties of any potential conflicts.
 Refrain from engaging in any conduct that would prejudice carrying out duties ethically.
 Abstain from engaging in or supporting any activity that might discredit the profession.
4. Credibility
 Communicate information fairly and objectively.
 Disclose all relevant information that could reasonably be expected to influence an intended user's
understanding of the reports, analyses, or recommendations.
 Disclose delays or deficiencies in information, timeliness, processing, or internal controls in
conformance with organization policy and/or applicable law
5. Professional behaviour:
As the name suggests a professional accountant should behave like a professional. It is desirable on his
part to comply with relevant rules and regulations and avoid any actions that discredit the accounting

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 profession. This is an obligation on the part of a professional accountant that his behaviour should not
harm the credibility of the business as well as the owner. He should not do anything which will
undermine the reputation of either the organization or the accounting profession.
Resolution of Ethical Conflict

In applying the Standards of Ethical Professional Practice, you may encounter problems identifying
unethical behavior or resolving an ethical conflict. When faced with ethical issues, you should follow your
organization's established policies on the resolution of such conflict. If these policies do not resolve the
ethical conflict, you should consider the following courses of action:

 Discuss the issue with your immediate supervisor except when it appears that the supervisor is
involved. In that case, present the issue to the next level.
 If you cannot achieve a satisfactory resolution, submit the issue to the next management level. If your
immediate superior is the chief executive officer or equivalent, the acceptable reviewing authority
may be a group such as the audit committee, executive committee, board of directors, board of
trustees, or owners. Contact with levels above the immediate superior should be initiated only with
your superior's knowledge, assuming he or she is not involved. Communication of such problems to
authorities or individuals not employed or engaged by the organization is not considered appropriate,
unless you believe there is a clear violation of the law.
 Clarify relevant ethical issues by initiating a confidential discussion with an IMA Ethics Counselor or
other impartial advisor to obtain a better understanding of possible courses of action.
 Consult your own attorney as to legal obligations and rights concerning the ethical conflict.

Q.2 What are the threats faced by a professional accountant

While complying with the fundamental principles a professional accountant has to face some potential threat
from different angels. There may be some circumstances which have a potential threat for a professional
accountant. Some of the threats are as follows:-

(A) SELF INTEREST THREAT:

When any financial matter occurs which goes against the interest of the professional accountant. On the other
hand if a close family member interest is hampered at that time this type of threat will be faced by the
professional accountant only.

EXAMPLE:

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(I) Having a close business relationship with a client.

(II) Concern about the possibility of losing a client.

(B) SELF-REVIEW THREAT:

This is a situation when a previous report on financial matter needs to be reevaluated by the professional
accountant. If the professional accountant is responsible for that judgment then this type of threat will come into
existence.

EXAMPLES:

(I) Reporting on the operation of financial system after being involved in their implementation.

(II) Preparation of original data which are used to generate records that are the subject matter of engagement.

(C) ADVOCACY THREAT:

In this situation the professional accountant needs to compromise the opinion of the subsequent position related
to financial matter. In such situation the professional accountant should argue the previous financial position.
EXAMPLES:

(I) Promoting shares in a listed entity and later the entity is found to be the financial statement of a client.

(II) Behave as an advocate on behalf of a client in dispute with third party.

(D) THREAT FOR FAMILIARITY:

This is a situation when a professional accountant desires to be sympathetic to some of the close relatives who are
quite familiar with the professional accountant. In these circumstances the professional accountant needs to be
favourable towards some of his close family members.

EXAMPLES:

(I) an employee is in a position to exercise direct influence over the subject matter of engagement.

(II) A member of the engagement team who is a close family relation with the employee.

(E) INTIMIDATION THREAT:

This is a situation when a professional accountant perceives some sort of threat to him while working towards
achievement of the objectives of the organization. The situation may come or may not come but the professional
accountant perceives that there may be a threat.

EXAMPLES:

Prof. Snehal Sunil Darji, Sheth Shree K. J. Patel BBA College ,Kadi Page 4
(I) Threat of dismissal in relation to client engagement.

(II) Threat with litigation.

All the above mentioned threats may arise for a professional accountant who is in public practice as well as in
business. When these threats arise it is the ethical duty of a professional accountant to be objective oriented. In
no circumstances he should succumb to these threats in his professional career. Hence it is said that during course
of operation a professional accountant may face different categories of threat but he should not be disturbed
when these threats arise. The ethical and moral responsibility of a professional accountant is to safeguard the
threats he used to face in his professional career. For the benefit of the accounting profession as well as for the
society he should not undermine a threat rather tries to innovate the technique how to safeguard those threats.

Q.3 Explain threat safeguarding techniques

All the threats which are come across for a professional accountant needs to be safeguarded. During
course of business or in public practice it is the duty of a professional accountant is to protect all types of
threat. Some of the threat safe guarding techniques are mentioned below.
A. TRAINING AND EXPERIENCE:
Training makes one perfect. In order to safeguard the threat the
professional accountant should be trained personnel who can deal any type of threat in course of
business or in public practice. An experienced professional accountant can able to handle all types of
threat in business properly and at appropriate time.
B. PROFESSIONAL DEVELOPMENT:
This is a technique where the professional accountant should develop himself in order to deal with any
type of threat during course of business or in public practice. Continuous development in professional
area ensures a professional accountant to be strong in safeguarding threats of business. He should be
well versed with all types of rules and regulations of accounting procedure and a strong mind set of
professional ethics in accounting system.
C. CORPORATE GOVERNANCE REGULATION:
It is another technique for a professional accountant to deal with the threat in business. A professional
accountant should be well acquainted with the corporate governance regulation so that he can able to
apply those regulations in situations of threat both in business and in public practice.
D. PROFESSIONAL STANDARDS:
This is considered to be another technique for a professional accountant to deal with threat in public
practice. Using professional standards the professional accountant can able to safeguard threat in
business. Professional standards are well defined procedures of business methods by which a

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professional accountant can able to utilize those standards for dealing all type of threat in business and
in public practice with an ethical manner. Professional standards are meant to protect the credibility of
business and accounting system.
E. DISCIPLINERY PROCEDURE:
This is another technique to deal with threat in business and public practice. Disciplinary procedures are
a code of conduct which is generally utilized in accounting and business practice. These procedures are
different form organization to organization. Hence it is the implementing authority of the organization
defines how to use disciplinary procedure so that there cannot be a business threat for a professional
accountant. Disciplinary procedure is different for business threat and public practice threat. Hence a
professional accountant should be well versed with these procedures so that he can able to use those
procedures at the time of requirement.
Unethical and unprofessional behaviour of business can be regulated by an ethical and high moral
professional accountant in business and in public practice. Hence it is desirable on the part of a
professional accountant to disclose the consequences of threat and the techniques to be applied in order
to safeguard these threat in business as well as in public practices.

`
Q.4 Explain value and attitude of professional accountant
1. Independence and Objectivity
 Ethics and independence go hand in hand in the accounting profession. A critical component of
trust is making unbiased decisions and recommendations that benefit the client. Conflicts of
interest, for example, demand exposure under independence guidelines. Benefiting from the sale
of one financial product over another could lead to a bias that skews financial advice to a client.
 To remain objective and independent, it is also necessary to ensure that recommendations are
not subject to outside influence. An accountant’s professional judgment is compromised if they
subordinate their judgment to someone else’s.
2. Integrity
 Demonstrating integrity means being straightforward and honest in all business and professional
relationships. Upholding integrity requires that accountants do not associate themselves with
information that they suspect is materially false or misleading — or that misleads by omission.
3. Confidentiality

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  Disclosure of financial information or revealing the disposition of a potential merger by an
accounting professional without express permission violates the trust that is the foundation of a
professional relationship — unless there is a legal or professional reason to do so.
4. Professional Competence
 As technology, legislation and best practices change, a professional accountant must remain up
to date. To exercise sound judgment, an accountant must stay abreast of developments that
could affect a decision’s outcome.
 Practicing due care means recognizing your skill level and not suggesting that you have expertise
in an area where you do not. Consulting with other professionals is a standard practice that helps
to bond a network of individuals and generate respect.
 Similar guidelines also apply to accounting professionals who supervise others. These
accountants must ensure that the subordinates receive proper training and guidance as they
carry out their responsibilities.
5. Professional Behavior
 Ethics require accounting professionals to comply with the laws and regulations that govern their
jurisdictions and their bodies of work. Avoiding actions that could negatively affect the reputation
of the profession is a reasonable commitment that business partners and others should expect.

6. Fiduciary duties

 When an adviser agrees to assist a client, they agree to take on a level of responsibility for that
person and their immigration matter. The client becomes dependent on the adviser in relation to
that assistance. This is a fiduciary relationship between the fiduciary (the adviser) and a principal
(the client). Even without a Code this fiduciary relationship means the adviser has certain
obligations to their client.
 7. Contractual obligations
 When an adviser enters into a contract (or written agreement) with a client this creates legally
binding obligations to perform the terms of the contract in a particular way. This includes a duty
to act with diligence, due care and skill, and also implies obligations such as confidentiality and
honesty, even if they are not specifically set out in the contract.
 Many ethical issues are likely to stem from advisers’ relationships with clients. Most of these can
be overcome by having clear terms in a written agreement about how certain matters will be

Prof. Snehal Sunil Darji, Sheth Shree K. J. Patel BBA College ,Kadi Page 7
 dealt with, such as the sharing of confidential information, the use of interpreters, refunds and
invoicing. More information on written agreements can be found in the Code of Conduct Toolkit.

Q.5 Explain value and attitude of professional accountant

1. Independence and Objectivity
Ethics and independence go hand in hand in the accounting profession. A critical component of trust is
making unbiased decisions and recommendations that benefit the client. Conflicts of interest, for
example, demand exposure under independence guidelines. Benefiting from the sale of one financial
product over another could lead to a bias that skews financial advice to a client.

To remain objective and independent, it is also necessary to ensure that recommendations are not
subject to outside influence. An accountant’s professional judgment is compromised if they subordinate
their judgment to someone else’s.

2. Integrity

Demonstrating integrity means being straightforward and honest in all business and professional
relationships. Upholding integrity requires that accountants do not associate themselves with
information that they suspect is materially false or misleading — or that misleads by omission.

3. Confidentiality

Disclosure of financial information or revealing the disposition of a potential merger by an accounting

professional without express permission violates the trust that is the foundation of a professional
relationship — unless there is a legal or professional reason to do so.

4. Professional Competence

As technology, legislation and best practices change, a professional accountant must remain up to date.
To exercise sound judgment, an accountant must stay abreast of developments that could affect a
decision’s outcome.

Practicing due care means recognizing your skill level and not suggesting that you have expertise in an
area where you do not. Consulting with other professionals is a standard practice that helps to bond a
network of individuals and generate respect.

Prof. Snehal Sunil Darji, Sheth Shree K. J. Patel BBA College ,Kadi Page 8
Similar guidelines also apply to accounting professionals who supervise others. These accountants must
ensure that the subordinates receive proper training and guidance as they carry out their
responsibilities.

5. Professional Behavior

Ethics require accounting professionals to comply with the laws and regulations that govern their
jurisdictions and their bodies of work. Avoiding actions that could negatively affect the reputation of the
profession is a reasonable commitment that business partners and others should expect.

6. Fiduciary duties

When an adviser agrees to assist a client, they agree to take on a level of responsibility for that person
and their immigration matter. The client becomes dependent on the adviser in relation to that
assistance. This is a fiduciary relationship between the fiduciary (the adviser) and a principal (the client).
Even without a Code this fiduciary relationship means the adviser has certain obligations to their client.

7. Contractual obligations

When an adviser enters into a contract (or written agreement) with a client this creates legally binding
obligations to perform the terms of the contract in a particular way. This includes a duty to act with
diligence, due care and skill, and also implies obligations such as confidentiality and honesty, even if they
are not specifically set out in the contract.

Many ethical issues are likely to stem from advisers’ relationships with clients. Most of these can be
overcome by having clear terms in a written agreement about how certain matters will be dealt with,
such as the sharing of confidential information, the use of interpreters, refunds and invoicing. More
information on written agreements can be found in the Code of Conduct Toolkit.

Q.6 what is corporate governance? Explain tools for ensuring corporate

Governance.

Meaning

Corporate governance is the combination of rules, processes or laws by which businesses are operated,
regulated or controlled. The term encompasses the internal and external factors that affect the interests
of a company’s stakeholders, including shareholders, customers, suppliers, government

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regulators and management. The board of directors is responsible for creating the framework for
corporate governance that best aligns business conduct with objectives.

Tools for corporate Governance

1. Efficient use of resources

2. Value addition to product
3. Maximization of customer satisfaction
4. Creation of wealth for the business
5. Developing value oriented organition
6. Develop ethical work standard
7. Management of risk
1. Efficient use of resources
 Resource management as part of project management is all about doing more with less. Nobody likes
waste, especially in business. Resource management is centered around optimization and efficiency.
When you know what you need to make a project successful, you can effectively plan out the optimal
way to use those resources.
 Take a Systematic Approach. One of the most effective ways of using resources and minimising
their use at work when possible is by adopting a systematic approach. This can be achieved by:
Setting a baseline – Using your previous performance as a base for improvement will help pave the
path for productivity Using efficiently resource is one of the tool of corporate governance.
2. Value addition to product

 The term "value-added" describes the enhancement a company gives its product or service before
offering it to customers. It can be considered as an extra special feature added by a company or
producer to increase the value of a product or service.
 Value-added applies to instances when a firm takes a product that may be considered
homogeneous—with few differences from that of a competitor, if any—and provides potential
customers with a feature or add-on that gives it a greater perception of value. For instance, a
company may add a brand name to a generic product or produce something in a way that no one has
thought of before.
 Adding value to products and services is very important as it provides consumers with an incentive to
make purchases, thus increasing a company's revenue.

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 Consumers now have access to a whole range of products and services when they want them. As a
result, companies constantly struggle to find competitive advantages over each other. Discovering
what customers truly value is crucial for what the company produces, packages, markets, and how it
delivers its products.And that’s why it is very important tool for corporate Governance
 For Example:- Amazon has been a force in the e-retail sector with its automatic refunds for poor
service, free shipping, and price guarantees on pre-ordered items. Consumers have become so
accustomed to its service that they are willing to pay for Amazon Prime memberships because they
value the free two-day turnaround on orders.

3. Maximization of customer satisfaction

 Customer satisfaction is a marketing term that measures how products or services supplied by a
company meet or surpass a customer’s expectation. Customer satisfaction is important because it
provides marketers and business owners with a metric that they can use to manage and improve
their businesses.

 It’s well understood that companies must continually work to provide customers with superior
service, with each area of the business having clear policies, rules, and supporting mechanisms to
ensure consistency during each interaction. However, few companies can deliver consistently across
customer journeys, even in meeting basic needs.
4. Creation of wealth for the business
 Wealth is created by a business organization that provides a unique value to its environment by
adding more value to its outputs than the cost of all resources used to produce those
outputs. Wealth requires a uniqueness and efficiency. ... Enterprises are paid to create wealth, not
control costs.
 A great way to become financially independent is through starting an information publishing
business.
 Instead of selling physical goods like flowers or clothing, as an information publisher you sell ideas,
guidance, and expert advice. These ideas can be communicated and sold in various forms, like e-
books, newsletters, reports, DVDs, membership sites, seminars etc Information Publishing is a great
wealth creation tool.
5. Developing value oriented origination
 Business begins with value creation. It is the purpose of the institution: to create and deliver value
in an efficient enough way that it will generate profit after cost.

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  Because value creation is the starting point for all businesses, successful or not, it’s a fundamental
concept to understand.
 The purpose of a business is to create value (through work), sell or trade it to customers, and
capture some of that value as profit.
 Creating value by producing a commoditized product is not a pathway to success. Think about the
substitutability of your product or service.
 The value of products and services today is based more and more on creativity — the innovative
ways that they take advantage of new materials, technologies, and processes. Value creation in
the past was a function of economies of industrial scale: mass production and the high efficiency
of repeatable tasks. Value creation in the future will be based on economies of creativity: mass
customization and the high value of bringing a new product or service improvement to market;
the ability to find a solution to a vexing customer problem; or, the way a new product or service is
sold and delivered.
6. Develop ethical work standard

 Our actions affect not only ourselves, but also those around us. Many of our professional
decisions involve ethics. If we tell a lie, we can lose someone’s trust and undermine our own
integrity. If we use shoddy materials or workmanship on the job, we can jeopardize the safety of
others.
 Questions of morality and ethics can be found at all levels of society. Ethical behavior is equally
important in the workplace as it is in our personal lives. Everywhere business is conducted, ethics
matters. That’s why develop ethical standard is very important tool in business because without
ethical standard in business we can’t get good atmosphere in work place.
 A successful business depends on the trust of various parties—employees, managers, executives,
customers, suppliers, and even competitors. Six ethical terms form the foundation of trust upon
which ethical business practice is built: Ethics, Values, Morals, Integrity, Character, Laws
 Ethics: - Ethics refers to a set of rules that describes acceptable conduct in society.
 Values:- Values are defined as the acts, customs, and institutions that a group of people regard in
a favorable way.
 Morals:- Morals are a set of rules or mode of conduct on which society is based.
 Integrity:- To have integrity is to be honest and sincere. Integrity is defined as adhering to a moral
code in daily decision making.

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  Character:- Ethics is not just how we think and act. It is also about character. Character drives
what we do when no one is looking.
 Laws:- The law is a series of rules and regulations designed to express the needs of the people.

7. Management of risk
Definition
 In the financial world, risk management is the process of identification, analysis and
acceptance or mitigation of uncertainty in investment decisions. Essentially, risk
management occurs when an investor or fund manager analyzes and attempts to quantify
the potential for losses in an investment, such as a moral hazard, and then takes the
appropriate action (or inaction) given the fund's investment objectives and risk tolerance.
 Risks can come from various sources including uncertainty in financial markets, threats
from project failures (at any phase in design, development, production, or sustaining of
life-cycles), legal liabilities, credit risk, accidents, natural causes and disasters, deliberate
attack from an adversary, or events of uncertain or unpredictable root-cause. There are
two types of events i.e. negative events can be classified as risks while positive events are
classified as opportunities.
 Risks management is an important process because it empowers a business with the
necessary tools so that it can adequately identify and deal with potential risks. Once a
risk’s been identified, it is then easy to mitigate it. In addition, risk management provides
a business with a basis upon which it can undertake sound decision-making.
 Here is the risk analysis process: identify existing risks, assess the risk , development of
appropriate response develop preventive mechanisms for identified risk.
 So, Our business ventures encounter many risks that can affect their survival and growth.
As a result, it is important to understand the basic principles of risk management and how
it can be used to help mitigate the effects of risks on business entities. That’s why its is
very importance tool for ensuring corporate Governance

Q.7 Explain principle of governance

1. Fairness
Fairness refers to equal treatment, for example, all shareholders should receive equal consideration for
whatever shareholdings they hold. In the UK this is protected by the Companies Act 2006 (CA 06).

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 However, some companies prefer to have a shareholder agreement, which can include more extensive
and effective minority protection.
In addition to shareholders, there should also be fairness in the treatment of all stakeholders including
employees, communities and public officials. The fairer the entity appears to stakeholders, the more
likely it is that it can survive the pressure of interested parties.
2. Accountability
Corporate accountability refers to the obligation and responsibility to give an explanation or reason for
the company’s actions and conduct.

In brief:

 The board should present a balanced and understandable assessment of the company’s position and
prospects;
 The board is responsible for determining the nature and extent of the significant risks it is willing to take;
 The board should maintain sound risk management and internal control systems;
 The board should establish formal and transparent arrangements for corporate reporting and risk
management and for maintaining an appropriate relationship with the company’s auditor, and
 The board should communicate with stakeholders at regular intervals, a fair, balanced and
understandable assessment of how the company is achieving its business purpose.

3. Responsibility
The Board of Directors are given authority to act on behalf of the company. They should therefore accept
full responsibility for the powers that it is given and the authority that it exercises. The Board of Directors
are responsible for overseeing the management of the business, affairs of the company, appointing the
chief executive and monitoring the performance of the company. In doing so, it is required to act in the
best interests of the company.
Accountability goes hand in hand with responsibility. The Board of Directors should be made accountable
to the shareholders for the way in which the company has carried out its responsibilities.

4.Transparency

A principle of good governance is that stakeholders should be informed about the company’s activities,
what it plans to do in the future and any risks involved in its business strategies.

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Transparency means openness, a willingness by the company to provide clear information to
shareholders and other stakeholders. For example, transparency refers to the openness and willingness
to disclose financial performance figures which are truthful and accurate.

Disclosure of material matters concerning the organisation’s performance and activities should be timely
and accurate to ensure that all investors have access to clear, factual information which accurately
reflects the financial, social and environmental position of the organisation. Organisations should clarify
and make publicly known the roles and responsibilities of the board and management to provide
shareholders with a level of accountability.

Transparency ensures that stakeholders can have confidence in the decision-making and management
processes of a company.

5.Benefits Of Corporate Governance

Strong corporate governance maintains investors’ confidence, whose support can help to finance further
growth. Companies who implement the principles of good corporate governance into working
environemnt life will ensure corporate success and economic growth. They are the basis on which
companies can grow.

Q.7 what is E- Governance? Write short note on E- Governance with its

feature and its Advantages and disadvantages.

Meaning

E- Governance

E-Governance can be defined as the application of communication and information technology for providing
government services, exchange of information, transactions, integration of previously existing services and
information portals.

(A) Feature/nature of E- Governance.

1.Better access to information and quality services for citizens:

it would make available timely and reliable information on various aspects of governance. ln the initial
phase, information would be made available with respect to simple aspects of governance such as forms,
laws, rules, procedures etc later extending to detailed information including reports (including

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performance reports), public database, decision making processes etc. As regards services, there would
be an immediate impact in terms of savings in time, effort and money, resulting from online and one-
point accessibility of public services backed up by automation of back end processes. The ultimate
objective of eGovernance is to reach out to citizens by adopting a Lifecycle approach i.e. providing public
services to citizens which would be required right from birth to death

2.Simplicity, efficiency and accountability in the government:

Application of leT to governance combined with detailed business process Re-engineering would lead to
simplification of complicated processes, weeding out of redundant processes, simplification in structures
and changes in statutes and regulations. The end result would be simplification of the functioning of
government, enhanced decision making abilities and increased efficiency across government - all
contributing to an overall environment of a more accountable government machinery. This, in turn,
would result in enhanced productivity and efficiency in all sectors.

3.Expanded reach of governance:

Rapid growth of communications technology and its adoption in governance would help in bringing
government machinery to the doorsteps of the citizens. Expansion of telephone network, rapid strides in
mobile telephony, spread of internet and strengthening of other communications infrastructure would
facilitate delivery of a large number of services provided by the government. This enhancement of the
reach of government - both spatial and demographic - would also enable better participation of citizens
in the process of governance.

4.Enabling Environment for Promoting Economic development –

Technology enables governments to create positive business climates by simplifying relationships with
businesses and reducing the administrative steps needed to comply with regulatory obligations. There is
a direct impact on the economy, as in the case of e-procurement, which creates wider competition and
more participants in the public sector marketplace.

5.Enhancing Transparency and Accountability:

e-Governance helps to increase the transparency of decision-making processes by making information

accessible – publishing government debates and minutes, budgets and expenditure statements,

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outcomes and rationales for key decisions, and in some cases, allowing the on-line tracking of
applications on the web by the public and press

6.Improving Service Delivery:

Government service delivery, in the traditional process, is time consuming, lacks transparency, and leads
to citizen and business dissatisfaction. By putting government services online, e-Governance reduces
bureaucracy and enhances the quality of services in terms of time, content and accessibility through
integrated service delivery platforms at the door steps of citizen. v Improving Public Administration- e-
Governance administrative components, such as a computerized treasury, integrated financial
management information systems, and human resource management systems, lead to greater efficiency
in public administration. Features include the integration of expenditure and receipt data, control of
expenditure, human resources management, intelligent audit through data analysis and the publishing of
financial data.

(B) Advantages and Disadvantages of E- Governance

(a) Advantages of E-Governance

1.Speed

Technology makes communication swifter. Internet, smartphones have enables instant transmission of high
volumes of data all over the world.

2.Saving Costs

A lot the Government expenditure goes towards the cost of buying stationery for official purposes. Letters
and written records consume a lot of stationery. However, replacing them with smartphones and the
internet can saves crores of money in expenses every year.

3.Transparency

The use of e-governance helps make all functions of the business transparent. All Governmental information
can be uploaded onto the internet. The citizens access specifically access whichever information they want,
whenever they want it, at the click of a mouse, or the touch of a finger.

However, for this to work the Government has to ensure that all data as to be made public and uploaded to
the Government information forums on the internet.

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4.Accountability

Transparency directly links to accountability. Once the functions of the government are available, we can
hold them accountable for their actions.

(b)Disadvantages of E-Governance

1.Loss of Interpersonal Communication

The main disadvantage of e-governance is the loss of interpersonal communication. Interpersonal

communication is an aspect of communication that many people consider vital.

2.High Setup Cost and Technical Difficulties

Technology has its disadvantages as well. Specifically, the setup cost is very high and the machines have to
be regularly maintained. Often, computers and internet can also break down and put a dent in
governmental work and services.
3.Illiteracy
A large number of people in India are illiterate and do not know how to operate computers and
smartphones. E-governance is very difficult for them to access and understand.

4.Cybercrime/Leakage of Personal Information

There is always the risk of private data of citizens stored in government serves being stolen. Cybercrime is a
serious issue, a breach of data can make the public lose confidence in the Government’s ability to govern
the people.

(c ) Interactions in e-Governance
There are 4 kinds of interactions in e-governance, namely:

1. G2C (Government to Citizens) — Interaction between the government and the citizens.
 This enables citizens to benefit from the efficient delivery of a large range of public
services.

 Expands the accessibility and availability of government services and also improves the
quality of services

 The primary aim is to make government citizen-friendly.

2.G2B (Government to Business):

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  It enables the business community to interact with the government by using e-governance
tools.

 The objective is to cut red-tapism which will save time and reduce operational costs. This
will also create a more transparent business environment when dealing with the
government.

 The G2B initiatives help in services such as licensing, procurement, permits and revenue
collection.

3.G2G (Government to Government)

 Enables seamless interaction between various government entities.

 This kind of interaction can be between various departments and agencies within
government or between two governments like the union and state governments or
between state governments.

 The primary aim is to increase efficiency, performance and output.

4.G2E (Government to Employees)

 This kind of interaction is between the government and its employees.

 ICT tools help in making these interactions fast and efficient and thus increases the
satisfaction levels of employees.

Q.8 Define corporate governance and briefly discuss the internal audit for
Governance. OR
Role of Internal Auditing in Corporate Governance
Meaning
1. Corporate Governance

Corporate governance may be defined as oversight of a corporation's policies, procedures and

practices. This oversight helps to ensure that the business is operated in the best interests of the
corporation and its shareholders. The process of managing corporate governance is usually handled by
a board of directors. The corporation may employ a staff of auditors to test and monitor internal
controls.

2. Internal Audit

Prof. Snehal Sunil Darji, Sheth Shree K. J. Patel BBA College ,Kadi Page 19
The definition of internal auditing is as follows: Internal auditing is an independent, objective assurance
and consulting activity designed to add value and improve an organisation’s operations. It helps an
organisation accomplish its objectives by employing a systematic, disciplined approach to evaluate and
improve the effectiveness of the risk management, control, and governance processes.

Internal audit for governance

1.Risk Evaluation

The first role that internal auditors play in corporate governance is risk evaluation. It involves the
identification of processes that carry significant risks for the company.

While many of these risks are financial in nature, the process cuts across all operations that have an
influence on the financial standing of the company. For instance, internal auditors care about
information systems because of the financial risks that a security lapse in information systems may
cause.

2.Responsibility

The ultimate responsibility for corporate governance in most organizations lies directly with the board
of directors. Internal auditors are charged with ensuring that corporate processes and associated
controls are functioning as intended. They also can determine if a process of the corporation could be
improved and could save the corporation money or could become more efficient. Ensuring that
resources of the corporation are used effectively is a major role of internal auditors.

3.Tracking Fraud and Irregularities

The second role that internal auditors play is that they help the organisation to track fraudulent activities
and other financial irregularities. Fraud comes about when an individual or group of people try to get
dishonest gain. Such individuals can be insiders or outsiders.

Irregularities refer to financial processes that do not conform to proper policies. The internal audit office
acts like the first line of defence against these schemes.

One of the most important tasks of the internal auditor is the detection of fraud. Left alone, fraud can
cause a corporation millions of dollars in lost revenue, and also can affect a corporation’s public image.

Prof. Snehal Sunil Darji, Sheth Shree K. J. Patel BBA College ,Kadi Page 20
The boards of directors of many corporations depend solely on the internal audit team to reveal
instances of fraud and abuse.

4.Type of Internal Audits

Different types of internal audits can be performed throughout the year. They may focus on financial
controls, operating controls or and information technology controls. A board of directors may decide
to test in all of these areas, or it may focus on only one.

5.Time Frame

The internal audit function in most corporations is a year-round process conducted by employees.
Typically, an audit manager drafts an annual audit plan, and the board of directors approves the plan.
Most corporate audits are focused and scheduled according the level of risk. Higher-level risk areas
often receive the most attention from the internal audit function in order to ensure that corporate
governance objectives are being met.

6.Analysis of Efficacy of Corporate Governance Processes

The next role that an internal auditor plays is that of policing the efficacy of the corporate governance
processes. Corporate governance manifests most clearly in the financial management systems. As the
auditor polices the entire financial system in the organization, he makes it possible for the organization
to tell just how strong its corporate governance processes.

7.Tracking the Value of Assets

Another important role that the internal auditor plays for an organization is tracking the value of assets
for the company. As the person who keeps the asset register, an internal auditor adjusts the value of the
assets to reflect the impact of inflation, depreciation and appreciation of the value of assets.

These changes come because of the changes in both the internal and external environment. This
information is important because it affects the values on the balance sheet, which in turn affects the
shareholder relations.

Prof. Snehal Sunil Darji, Sheth Shree K. J. Patel BBA College ,Kadi Page 21
The structure and value of assets forms an important part of the decisions executives take in as far as the
goals of the organization. This impact makes an internal auditor a very significant player in the corporate
governance process.

8.Review of Corporate Performance in Operations and Financial Issues

The internal auditor provides a global view of the corporate performance and its financial issues. This
role is very critical when conducting analysis to determine whether the organization made profits or
losses. These reviews reflect the effectiveness of the corporate governance processes such as business
planning and implementation.

The advantage an internal auditor has over an external auditor is the capacity to trace small changes in
the company’s financial deals that may point towards future profits or losses.

9. Recommendation of Policy Actions

Another important role that an internal auditor plays is that he develops policy recommendations for the
organization to enable it to improve its corporate governance processes.

Q.9 Explain Planning and Process of the internal audit report

Step #1: Know what and when to audit

Before conducting the internal audit, you should identify what processes are going to be audited. Understanding the
scope and objectives of the audit process will help you create an audit schedule. As mentioned earlier, internal audit
should be conducted based on the risks of the processes. The higher the risk in a specific area of the business the more
frequent you would want to audit that business area. It is also essential to understand the nature of the business
process you are planning audit so that you can decide the right time to audit the system.

Step #2: Create an audit schedule

Creating an audit schedule provides the departments with an advanced notice of the upcoming audit. The program will
help them have the necessary documentation and records available for review and audit. The internal schedule will also
the business of planning for resources required to conduct the internal audit. A surprise audit is not recommended as it
may create a disengaged situation and stakeholders will feel threatened by the auditor. It is recommended you share
the audit schedule and obtain approval and confirmation.

Step #3: Pre-Planning the scheduled Audit

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Being prepared before a scheduled audit is essential as it will simplify and make the whole audit process effective.
During the pre-planning phase, auditors need to send an audit plan to department providing information about the
audit scope, objective, criteria and possible documentation evidence needed for the audit.

It is necessary that the auditor is prepared before the audit with a clear understanding of the policies and procedure
that will be reviewed. For example; Before auditing a purchasing process, the auditor needs to understand the policies
and procedures related to purchasing and also know what kind of evidence that he/she may review. This will
significantly improve the efficiency of the audit process will also reduce the downtime

Step #4: Conducting the audit

Internal audit can be conducted by different methods such as documentation review, interviewing and observation.
Based on the scope and objective of the auditor, the audit shall choose any methodology or combination of all to carry
the internal audit. The internal auditor shall sight and examine sufficient hard-copy or electronic records to verify;
evidence of compliance with the management system procedures; and effective implementation of process and
internal control. You need to ensure the audit is conducted in a fair and unbiased manner.

Step #5: Record the findings

Recording the findings is vital in the audit process, and auditor needs to list all evidence sighted by record number or
record data. The aim of documenting audit findings is to identify gaps in compliance and look at opportunities to fix the
deficit and improve the process. Records may also include observation and notes from the interview process. It is
recommended that the auditor provide a quick snapshot of the findings quickly at the end of the internal audit to
ensure the auditee is aware and also has a chance to clear any questions.

Step #6: Report findings

All findings should be reported in an easy to read audit report. Audit reports serve evidence that an internal audit was
conducted. These reports should be reviewed and approved by the department manager / top management. The report
can also include an improvement / corrective action plan that should need to develop and implemented in the areas
where gaps were identified. ISO recommends you use PDCA (Plan, Do, Check, Act) Management tool to facilitate and
carry improvement process within the business.

To be successful, it is crucial that business meet the needs of their customer and can deliver products and service
accurately without any error. All internal controls established by the organisation needs to be maintained and
effectively followed to support quality products and services. An internal audit is a management tool that organisations
use to ensure that process meets requirements.

Q.10 Explain nature and scope of internal audit for corporate

Governance

Prof. Snehal Sunil Darji, Sheth Shree K. J. Patel BBA College ,Kadi Page 23
Nature of Internal Audit

The following are the nature of internal audit:

1. Independent: The internal auditor should work independently. The word independent implies that the
audit work should be free from any sort of restrictions that may have a significant impact on the scope
and effectiveness of the review process and on the reporting of the findings and conclusions. Therefore,
the internal audit work is detached from regular day-to-day operations of the organization.
2. Appraisal: The word appraisal implies a critical evaluation and assessment of the existing controls and
operations of the business enterprise. The internal auditor should appraise them on the basis of
appropriate criteria.
3. Established: The management should organize an independent internal audit department and duties
should be specifically assigned to the department.
4. Examine and Evaluate: The terms of examination and evaluation describe the two fold functional roles
and responsibilities of the internal auditor. Firstly the internal auditor should make an examination and
enquiry for fact finding. Secondly he should make a judgmental evaluation after thorough examination.
5. Activities of the Organization: Internal audit aims at conducting a systematic examination of records,
procedures and operations of an organization. The internal auditor should carefully examine the controls
established inside the organization. In this sense internal audit can be described as Control Over Other
Controls. Controls are essential for every organization. In the absence of controls, it would be impossible
for any organization to protect its assets, rely on the records and perform its functions successfully. The
internal auditor examines the effectiveness of each control system and traces out the deficiencies in
each system.
6. Service: Internal audit is a service to the whole organization. The internal auditor is an employee of
the organization. His services can be availed at any time of emergency. His advice can be obtained on any
matter or point significant from the business and strategic point of view. His services can also be
effectively utilized by other employees from the top to bottom. Any employee can consult him in solving
the day-to-day problems.
7. To the Organization: The primary concern of an internal auditor is the phase of business activity
where he can render any service to the management not only top management but all other managerial
as well as operating staff. Therefore, the internal auditor should be an expert in all branches of business.
In this respect, the internal auditor is superior to the financial auditor and even the cost auditor. His
services are very useful to all the employees throughout the organization at all times. The terms ‘To the

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Organization‘ also signifies that internal audit is a total concept of service having a broad meaning and
connotation.

Scope or Functions of Internal Auditing

Internal audit involves five major functions or areas of operation. They are as below:

1. Reliability and Integrity of Information:

The internal auditor should review the reliability and integrity of financial and operating information and
examine the effectiveness of the means used to identify, measure, classify, and to report such
information of government.
2. Compliance with Policies and Procedures:
The systems and procedure also have considerable impact on the operation of the business enterprise.
The internal auditor should gauge the effectiveness and impact of such systems and report thereon.
3. Safeguarding the Assets:
The internal auditor should review the existing system for safeguarding the assets and if necessary
should verify the existence of such assets.
4. Economical and Efficient Use of Resources:
The internal auditor should also appraise the economy and efficiency with which the resources are
employed. Further the internal auditor should identify the conditions, which would prevent the
economical use of resources. They are as follows:
1. Under utilization of capacity.
2. Non-productive work.
3. Procedures, which are not cost, justified.
4. Over staffing or under staffing.
5. Accomplishment of the Established Objectives and Goals:
The internal auditor should make a review of the operations or programmes of the enterprise and should
ascertain whether the results are not inconsistent with the established goals and objectives of the
enterprise. He should also ascertain whether the programmes are carried out as per plan.

Q.11 Define Investigation of fraud. Basic step for investigation of fraud

Meaning

Prof. Snehal Sunil Darji, Sheth Shree K. J. Patel BBA College ,Kadi Page 25
Fraud
The act of defrauding people or business entities for monetary gain or prestige, involves the act of
deceiving or misrepresenting oneself. Fraud is a nonviolent crime; however, the negative externalities it
imposes can be equally debilitating.

In criminal law, fraud refers to an intentional deception mad by an individual for personal gain or to
defame another individual. The specific legal definition of “fraud” will vary based on location; however,
in the majority of legal jurisdictions, a fraudulent act is a crime and a civil violation.

The Basic Steps of a Complex Investigation

The information below illustrates basic steps in a typical complex procurement fraud case. Most
significant fraud and corruption cases occur in procurement.

Click on each step for a more detailed explanation of the step. Of course the steps are general
suggestions that can be adjusted to your situation. Some cases will require fewer steps, others perhaps
more or different, such as requesting international legal assistance, which is not addressed here.

The steps below assume that your case begins with a complaint about the procurement process, without
any specific information about possible illegal payments or fraud. If so, your investigation would typically
begin by examining the procurement process to identify leads and eventually evidence of bribery,
collusion or other wrongdoing. This is the way most such cases begin and are organized.

In other cases your investigation may begin with reports that a public official is displaying unexplained
wealth or living beyond means, suggesting possible corruption, without reference to any particular
procurement abuses. In that case you must reverse the investigation process by first identifying the illicit
financial transactions and then tracing them back to the underlying procurement transactions, if
necessary. See Step Seven below for more information on this approach.

STEP ONE Begin the case (respond to complaint, etc.)

If the case starts with a complaint or report, fully debrief the complainant, getting as much detail as
possible. If the case starts with the discovery of a red flag, match the red flag to the potential scheme
and then look for other red flags of the suspected schemes. An automated, “proactive” search for fraud
indicators might be effective if the necessary data is available.

STEP TWO Evaluate the allegations or suspicions

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 Determine whether the allegations or suspicions – the “red flags” – are specific and serious enough to
justify an investigation, which can be time consuming, disruptive and costly.

If you determine that a complaint or report warrants further investigation, try to make a quick,
preliminary assessment of the accuracy of the complaint. For example, if the complainant alleges that he
or she was unfairly disqualified from a tender, examine the relevant project files to attempt to determine
if this may have occurred. Use this information to prepare for the follow up interview of the
complainant.

STEP THREE Conduct due diligence background checks

Check on-line and other records on the suspect firms and individuals to evaluate the allegations and to
look for other evidence of fraud or corruption, such as the presence of shell companies as
subcontractors, prior debarments of a contractor or evidence that a project official is living beyond his
means.

STEP FOUR Complete the internal stage of the investigation

Complete the collection of documents, data and interviews within the investigating organization, e.g.,

 Look in the bidding documents for evidence of corrupt influence through the manipulation of the
“SPQQD” factors – Selection, Pricing, Quantity, Quality and Delivery;
 Carefully examine bids and proposals, CVs and other documents submitted by a suspect firm for
possible fraudulent representations;
 Access, with the proper authority, the relevant e-mail and computer hard drive information;
 Determine if an early interview of the subject is warranted.

STEP FIVE Check for predication and get organized

Review the results of the investigation to date to determine if there is adequate “predication” – a
sufficient factual basis – to proceed. Decide or refine your initial “Case Theory” and organize the
evidence according to the elements of proof of the potential claims. If law enforcement assistance is
needed (e.g., to subpoena documents, exercise search warrants or to request international legal
assistance) take steps to ensure that there is sufficient “probable cause” to obtain such cooperation.

STEP SIX Begin the external investigation

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Conduct interviews of witnesses outside the investigating organization, proceeding from the
disinterested, cooperative witnesses to “facilitators” to co-conspirators to the subjects. Request or
compel documents from third parties and the suspect contractors through negotiated agreements, the
exercise of contract audit rights or, if available with law enforcement assistance, subpoenas or search
warrants.

STEP SEVEN Prove Illicit Payments

Determine the best strategy to prove illicit payments: out from the point of payment (by examining the
contractor’s records), or back from the point of receipt (from the suspect employee’s records) and begin
the tracing process. If it is not possible to prove the corrupt payments directly, try to prove them
circumstantially by showing the subject displayed unexplained sudden wealth or expenditures.

STEP EIGHT Obtain the cooperation of an inside witness

This could be an honest inside observer or a lesser participant in the offense, such as a middleman or the
smaller of several bribe payers. Decide the best strategy to obtain his or her cooperation.

STEP NINE Interview the primary subject

In a corruption case, conduct a thorough interview of the primary subject, usually the suspected bribe
recipient. Ask about his role in the suspect contract award and relevant financial issues, such as his
sources of income and expenditures. Decide if there is sufficient evidence to obtain a confession; if not,
try to get helpful admissions and identify possible defenses (different objectives require different
tactics.) Record the interview, if possible, and request all relevant financial and other records. In a fraud
case, interview the person most knowledgeable and responsible for the suspected false statement or
fraudulent document. Again, decide if there is sufficient evidence to obtain a confession and, if not, try
to get helpful admissions and identify possible defenses. These typically include that any false statement
was an honest mistake, or that another person was responsible for a fraudulent document. Record the
interview if possible.

STEP TEN Prepare the final report

Decide what action to recommend based on the results of the investigation – an administrative sanction
or criminal referral, for example – and prepare a concise final report, organized according to the
elements of proof for the relevant offenses.

Prof. Snehal Sunil Darji, Sheth Shree K. J. Patel BBA College ,Kadi Page 28
In short
What is the Fraud Investigation Process like?
• As stated before, fraud is intent to deceive; if a company promises something regarding a product, for
example, in order to sell the good, they would be guilty of fraud if that product does not work as
advertises. A fraud investigation attempts to determine whether fraud has occurred and tries to
establish evidence if a fraudulent maneuver has occurred.
• A fraud investigation will begin with a meeting between a fraud investigator and the party who is
alleged to be deceived. The individual launching the fraud investigation must explain to the investigator
why fraud has taken place; during this explanation the individual must hand over all evidence to spark
the fraud investigation process.
• Once evidence has been exchanged, the fraud investigator will use the initial information to gather
more evidence and facts concerning the fraudulent party. An investigator may use asset searches,
background checks, employee investigations, testimonials and surveillance to conduct the fraud
investigation.
• In the majority of fraud investigations, the investigator will deal with white collar criminals—as a result
of this classification, the fraud investigation will revolve around the review of complex financial
documents. That being said, just as there are different forms of fraud, there are different types of fraud
investigations. For example, an insurance fraud case will require the investigator to uncover those who
make false claims to receive insurance compensation.
• A fraud investigation is essential for victims of fraud; fraud costs the economy billions of dollars a year.
As a result, stopping fraud or mitigating those externalities it imposes is in everyone’s best interests.

Q.12Explain tools of Good Governance used in India. (As Whole Countries

Government)

1. Right to Information
2. Right to Service
3. Lokpal/Lokayukta
4. Right to Hearing
5. Right to education
6. Whistleblower Protection Act, 2011
7. eGovernance

Prof. Snehal Sunil Darji, Sheth Shree K. J. Patel BBA College ,Kadi Page 29
1.Right to Information Act, 2005
Under this Act any citizen may request for information from a ‘public authority’ which is required to
reply expeditiously or within thirty days. ‘Information’ also includes ‘information relating to a private
body which can be accessed by a public authority under any law
2.Right to Service Act, 2011

This Act guarantees time bound delivery of various public services rendered to citizens and provides
mechanism for punishing the errant public servant if they are who is deficient in providing the stipulated
service. Each state has enacted their own RTS Legislation

3.Whistleblower Protection Act, 2011

Whistleblowers who expose alleged wrongdoing (fraud, corruption or mismanagement) in government

bodies, project and offices are protected under this Act. It also ensures punishment for false or frivolous
complaints.

4.Lokpal and Lokayukta Act, 2013

It provides for the establishment of Lokpal for the Union and Lokayuktas for the States to enquire into
allegations of corruption against certain public functionaries and for matters connected therewith or
incidental thereto.

5.Right to Hearing Act, 2012

 Public official are bound to dispose complains within a stipulated time.

 Penalty for fail action can range from Rs. 500 to Rs.5000. this amount is to be deducted from
official’s salary
 It entitles citizens to a time bound legal remedy to their grievances relating to government
services.

6.Right to Education Act, 2009

 ‘Free’ means no child shall be liable to pay any kind of fee or charges or expenses which may
prevent them from pursuing and completing elementary education.
 Age group: 6-14 years
 Act contains specific provisions for disadvantaged groups owing to social, cultural, economical,
geographical or any other factor.

Prof. Snehal Sunil Darji, Sheth Shree K. J. Patel BBA College ,Kadi Page 30
  Under this act, central and state government are responsible for funding the education of
children.

7.E- governance
E-governance is not really about technology. It is about people, processes, and results-using information
and communications technologies (ICT) to improve the transparency, efficiency, and effectiveness of
public institutions. Governance can be seen as the exercise of economic, political and administrative
authority to manage a community's affairs at all levels. It comprises the mechanisms, processes and
institutions through which community members and groups articulate their interests, exercise their legal
rights, meet their obligations and mediate their differences. The challenge for all societies is to create a
system of good governance that promotes supports and sustains human development-especially for the
poorest and the most marginal. Good governance is among other things participatory, transparent and
accountable. It is also effective and equitable and it promotes the rule of law, ensures the political, social
and economic priorities are based on broad consensus in society. One goal of good governance is to
enable an organization to do its work and fulfill its mission. In this context, this paper makes an attempt
to explore how far e-governance is useful for achieving good governance in India.

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