REC is a well known equity and debt issuer, with an IPO/FPO and many successful bond issues under its belt. It even has Navratna status, and is an important partner in the Indian Government's efforts for rural electrification. But when it comes to listening to its auditors and solving their audit queries, it has a long way to go. From the Feb12 bond prospectus(http://www.sebi.gov.in/cms/sebi_data/attachdocs/1330060059753.pdf), I noticed that many points were repeating in the audit objections in Appendix I F-1 to F-4 after Pg 302, which are tabulated below in brief.
You would notice that the major violations relate to utilization of government grants, monitoring of loans given to SEBs/discoms, and an elementary thing like obtaining search reports. And despite power projects getting 'restructured' routinely, it had not occured to the management to ensure that they ascertain the viability of the revised project before according their routine sanction to the restructured loans.
And mind you, this was not the C&AG audit which is anyway expected to be critical. It was the statutory financial audit, for which the points were raised but not acted upon(hence they repeat for each year). It is not my intent to criticize the auditors-after all change takes time in government organizations, and they did play their part by qualifying the report. Note that the financial auditor has only the audit report to apply 'moral suasion' on the company to make the change. But for some points to be unresolved for the past 4-6yrs as seen in this table, is a bit incredible. To their credit, REC did solve a few audit objections by FY11(hence they drop off) but the pace is just too slow. It is hoped that listing and the frequent bond issues will make REC more respectful of the auditor's recommendations.