Page 29 - iiA
P. 29
Frontline Insights:
What They Wish the Board knew
seemingly unshakable institutions—transforming
traditional oversight into a catalyst for sustainable
value creation.
Finding the optimal balance between governance,
independence, oversight, and responsibility
presents a significant challenge. Organizations
must carefully navigate these interconnected
elements to create effective management structures
Maulik Shah that both ensure proper controls while enabling
operational efficiency.
Sanofi’s Ethics & Business Integrity team
mauliks3@gmail.com Before we dwell into how the responsibilities
of auditors and the board of directors have
transformed over time, let’s examine notable
accounting scandals where oversight by both
In today’s volatile business landscape, auditors auditors and board missed in detecting it, resulting
and boards have evolved from mere compliance in severe repercussions including financial damage
checkers to strategic guardians of organizational to investors
integrity. This partnership now stands at the
frontline of defense against financial disasters that 1. Satyam Computer Services (2009): Often
can destroy shareholder value overnight. called “India’s Enron,” founder Ramalinga Raju
admitted to inflating profits by billions. The
Consider IndusInd Bank’s recent derivatives board failed to detect falsified bank statements
debacle—where accounting missteps triggered and fabricated revenue for years.
market panic, regulatory investigations, and
shattered investor trust. This wasn’t just a technical 2. Punjab National Bank (PNB) (2018): Nirav
error; it represented a fundamental breakdown in Modi and Mehul Choksi orchestrated a billion $
governance vigilance. fraud through fraudulent letters of undertaking.
The bank’s board and audit committees missed
The most resilient organizations now recognize that the lack of integration between core banking
the auditor-board relationship isn’t a bureaucratic systems and SWIFT messaging.
formality but a dynamic alliance that:
3. IL&FS Crisis (2018): The infrastructure
• Anticipates emerging risks before they lender defaulted on debt obligations, revealing
materialize massive hidden liabilities. The board, which
• Challenges management assumptions that included prominent figures, failed to detect the
could mask financial realities misrepresentation of the company’s financial
health.
• Creates a culture where transparency trumps
short-term performance pressures 4. Yes Bank (2020): Under Rana Kapoor’s
leadership, the bank concealed bad loans
As regulatory demands intensify and stakeholder and engaged in improper lending practices
expectations soar, this partnership has become that eventually led to its near-collapse and
the invisible shield protecting organizations from subsequent bailout.
financial reporting failures that have toppled
INTERNAL AUDIT TODAY 26
