The Hindu Business Line : Save the auditors from becoming box-tickers

THERE used to be that once-in-a-week session that read `moral science' in school timetables. A slot essentially for storytelling, though kind teachers were not against allowing students to do their own thing. Corporate governance is no different. "It is used in common parlance but its meaning is not necessarily understood," writes Vasudha Joshi in Corporate Governance: The Indian Scenario, published by Foundation Books P Ltd.

Joshi is upset that `much of the existing literature' flogs a few aspects repeatedly. "There is hardly any attempt to systematically fit various happenings in the theoretical framework," she laments. Driven by disturbing developments, corporate governance discussions scurry to focus on accountability. But autonomy is equally critical, argues the author. Lash accountability hard, and what you get is a bunch of risk-averse CEOs and directors, accompanied by auditors who'd feel safe adopting "a box-ticking approach".

Joshi discusses major corporate governance systems, such as of the US, UK, Germany and Japan, before moving on to `three perspectives', viz. of shareholder, organisation, and stakeholder. She also deals with three models: principal agent model that provides the basis to capital market-control perspective; myopic market model where short-term reigns; and political economy model that looks at two sets of stakeholders, inside and outside.

The book concludes with a two-pronged prescription: "Better disclosure by firms and efforts to enhance capital market efficiency by the regulators." Useful read.

If you can't stand the standards...

GENERALLY, official pronouncements such as what make up generally accepted auditing standards (GAAS) don't make pleasant reading. For the US professional, however, there is the trio, Dan M. Guy, D.R. Carmichael, and Linda A. Lach, to transform the bureaucratic lingo of boards and committees into something easy to read and understandable.

Thus, Practitioner's Guide to GAAAS 2004, from Wiley (www.wiley.com) covers all Statements on Auditing Standards (SAS), Statements on Standards for Attestation Engagements (SSAE), Statements on Standards for Accounting and Review Services (SSARS), and interpretations on these.

As the preface explains, the book is designed to help CPAs "in the application of, and compliance with, authoritative standards." Discussion separates the `minimum requirements' from more elaborate advice, observations and subordinate info.

For each pronouncement, the authors provide their inputs in seven parts: `effective date and applicability' is a brief identification of the standard, and circumstances where it is applicable; `definition of terms' is a glossary to explain terms in one place, though they are "ordinarily scattered throughout a standard"; `objectives of section' is "a behind-the-scenes explanation of the reasons for the pronouncement and a capsule explanation of the most basic ideas of the section"; `fundamental requirements' concisely lists what is specifically mandated; `interpretations'; `techniques for application'; and, most useful, `illustrations'.

A format that is worthy of emulation in the Indian context too.

The unreal can be truth

KEYWORDS series edited by Nadia Tazi, and brought out by Vistaar Publications (www.indiasage.com) gathers in small books, thoughts from scholars around the world on universal words such as `identity', `gender', and `experience' that are widely used in daily discourse though "most of us are unclear about their philosophical and cultural roots". Here is the one on Truth, for the seekers of the elusive concept in the accounting profession.

From Africa, Deborah Posel writes: "The idea of an objective, reliable truth has come increasingly under fire from a range of relativist arguments insisting that truth-finding is an active, interpretative activity that is inevitably and irrevocably imprinted with the subjectivity of those who set off in its pursuit."

Douglas Patterson reflects on "American thought about truth" and says that the words `is true' greatly enhance "the expressive power of one's language, as they allow one to commit oneself to claims that one could not otherwise express."

There are also pieces about truth from the Arab world, Europe and China. Ganesh Devy's paper is on `truth in Indian traditions' opening with the story of Nachiketa's quest for truth all the way to the death-land.

Devy wraps with a comment: "Globalised India, glorying in its freedom, jubilant in its proliferation of celluloid dreams, has come to accept that the unreal can be, when made up, truth." Is it true that this shows in accounts too?

BooksOfAccount@TheHindu.co.in

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Save the auditors from becoming box-tickers