For better protection to bond and mutual fund investors, SEBI must extend the requirement on making forensic audit reports. Comment (200 Words)
Refer - Business Line
Enrich the answer from other sources, if the question demands.
IAS Parliament 4 years
KEY POINTS
· SEBI’s diktat requiring listed entities to disclose forensic audits will curb information asymmetry
· This is a welcome move because the very initiation of a forensic investigation and an explanation on whether it was initiated by the regulator or the company’s own Board, is price-sensitive information and has a bearing on one’s decision to invest in a stock.
· Making full public disclosures of forensic audit reports as soon as they are submitted is essential too, to do away with insider trading and stock price manipulation based on half-baked leaks from such reports.
· Disclosing forensic audit reports to the public would remove all scope for selective interpretations and allow analysts and investors in a company to make up their mind for themselves.
· Placing forensic audit reports in the public domain will also prove instructive to investors and policymakers on the modus operandi used by fraudsters to divert public money.
· In the DHFL and PMC Bank cases, forensic investigations brought to light the multitudes of fictitious accounts used to channel depositor funds to related parties in the form of loan disbursals.
· For better protection to bond and mutual fund investors, SEBI must extend the requirement on making forensic audit reports public not just to entities with listed shares, but also those with listed debentures and all entities dealing with public money in a fiduciary capacity.
· In fact, given that they commission scores of forensic audits on their constituents each year, it would be a good practise for regulators such as SEBI and RBI to set a good example by publishing the findings of these reports, instead of keeping them a closely guarded secret.
