Rules, Please

Trumping up Assets: Buy a fixed asset, sell part of it, but continue to show the old value in the books.

Tricky Depreciation Change the method or rate of depreciating assets

Show lower liabilities Immediately shows positive results on profitability

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Already there are noises being made about strengthening Clause 49 of SEBI's listing agreement to take punitive action against directors of companies for violations. Prithvi Haldea of Prime Database avers, "Relying on independent directors is relying on false comfort as there is no entry requirement." Sources close to the developments add there's also a plan to separate the regulatory and educational functions of accountancy watchdog ICAI as also to change section 628 of the Companies Act under which the Serious Fraud Investigation Office (SFIO) functions. The intent is to give SFIO independent regulatory powers so that it doesn't have to seek clearances from local police stations and courts.

There is also some talk of ensuring that ICAI, in its regulatory function, has provisions to ensure stronger punishments to violating auditors and their firms. "The whole profession has come under a black cloud. It's time to go back to basics. We are taught to be sceptical in our training to be CAs and we have to ensure that stays," says an auditor. This is one of the reasons that people like Damodaran are in favour of rotating both auditors and independent directors on the boards.

Of course, it is expected that audits will become more expensive and compliance costs will increase. Also, there's still the question of being able to find qualified and suitable people to take seats on the boards of the thousands of companies, listed and unlisted, in India. But given the mess at Satyam—with the new board walking in blind and flip-flops on a government bailout—the debate about over-regulation will take a backseat. As always, there's that fear about ennui, the fickle, shifting nature of the public mood. If corporate India's Pandora's Box has been well and truly opened, there's only hope at the bottom of it all.