Ethics in Finance
Group No.04
Presented byNikhil Jamnare
Roll No.19
Pranav Soman
Roll No.53
Vijaykumar Pammi
Roll No. 35
Hardik Sampat
Roll No.45
Ashesh Joshi Roll No.21
Characteristics of Management
Prone to Fraud
Unduly aggressive financial Targets
 Domination by person or group without
controls
 Aggressive accounting practice to keep stock
prices high
 Pressure to reduce tax liabilities
 Major performance related compensation
 Non-Financial personnel involved in
accounting matters

Ethical issues in Finance
 Financial
statements
 Financial
Markets
◦ Insider Trading
 Hostile Takeovers
Fraud in Financial Statements
 Fictitious
Revenues
 Concealed Liabilities and Expenses
 Fraudulent Asset Valuations
 Improper or Fraudulent Disclosures or
Omissions
Creative accounting – form of
fraudulent financial reporting so as to
provide misleading information.
Duties of an Auditor
 To
give an accurate statement to the
members about the state of affairs of a
company
 To meet the objectives of the Companies
Act 1985 and also the Articles of Association
 To be reasonably skillful and careful in
identifying the true nature of the accounts
Ethical Audit

An audit that assess a business’s structures,
procedures, systems and policies.

It measures the extent to which the activities
of a business comply with the standards it has
publicly declared to its external customers

It measures business conduct against varied
moral standards of the community.
Objectives of Ethical Audit

To provide a critical assessment of functioning of business

To investigate into acquisition or restructuring operations

To determine the type of training necessary for employees

To establish ethical conduct of business

To enhance, measure and promote the quality that increases
business performance by assessing them against the ethical
business objective

To improve the quality of governance by evaluating the
performance and ensuring that financial information is both
available and reliable
Ethical Issues in Financial Markets
Deception: act of misrepresenting
relevant information
 Churning: Excessive or inappropriate
trading for clients account by a broker
who has control over the account with
intent to generate commissions rather
than to benefit client
 Unsuitability
 Unfairness in Markets

Insider Trading
 Refers
to trading on price sensitive
information by company employees
or individuals closely connected with
the firm
 This
information has not been
disclosed to other market
participants
Ethics & Insider Trading
 It
violates equality of opportunity
 Does not give a level playing field
between insiders and outsiders
 Might harm exchange as a whole because
investors might not be willing to trade
on exchange that does not give
shareholders their rights.
Hostile Takeovers

Are those that elicit opposition from the
boards or employees of Target company

Reasons for opposition are as follows:
 Disagreements over price
 Protecting their own interests
NSEL CRISIS
Joint Venture between FTIL & NAFED
Commencement – 15th OCT’2008
H.O.:MUMBAI
5600 crore rupees scam!!!
An outreach in 16 states trading in 52 commodities
What triggered the scam?
Permission to retread without taking delivery of goods
WHAT WENT WRONG?
31st July 2013 NSEL was stopped from carrying out new contracts
Investors protested on 28th august 2013
Filing of FIR by PANKAJ RAMNARESH SARAF Against NSEL
Action by economic offence wing
FURTHER STEPS
Police arrest of MD ANJANI SINHA ,ASSISSTANT VICE PRESIDENT
AMIT MUKHERJEE & other borrowers
Attachment of property of defaulters
Fudging of documents by NSEL officials
EFFECTS OF THE SCAM
Derailing of the commodity market
Erosion of investor confidence
Liquidation by Retail & Institutional players
List of Big scams in India
Scandal
Saradha Group financial
scandal
Indian Coal allocation
scam
Uttar Pradesh NRHM
scam
2G scam
Year
INR
Reporte
value
d
2013
National
10000 Uttar Pradesh
2008 176,000
Uttar Pradesh food grain
2003
scam
People involved
Summary
Mamata Banerjee, Mukul Roy,Madan
Ponzi Scheme(Fraudulent Investment) –
30,000 West Bengal Mitra, Kunal Ghosh, Srinjoy Bose,
200 private companies
Sudipto Sen and many more
2012 185591
2012
Location
National
35000 Uttar Pradesh
Comptroller and Auditor General of
India, the coal ministry, many
electricity boards and private
companies
coal blocks allotted, not auctioned
Mayawati, Babu Singh Kushwaha
siphoned off a massive sum estimated
at 100 billion (US$1.6 billion)
Nira Radia, A. Raja, M. K. Kanimozhi, communication bandwidth auctioned
many telecommunications companies
for lower than market value.
Mulayam Singh Yadav, Mayawati
Food which the government purchased
to give to the poor was instead sold on
the open market
Speak Asia
 Promoter : Sumiran Pal & two other masterminds
 Affects – 2.4 million Indians
 Scam amount – 2200 crore
 Scam – Getting investment by conducting marketing research in
the name of big companies
Thank you