Mumbai: Markets regulator Sebi on Thursday proposed stricter disclosures, including detailed reasons, on resignation of auditors amid rising instances of auditors quitting companies.
An auditor would also have to provide appropriate disclaimer in case his or her resignation is due to non-receipt of information from the company.
The regulator also proposed to further strengthen and clarify the role of audit committees of listed firms.
The Securities and Exchange Board of India came out with the proposals as it found that resignation of an auditor before completion of the audit of financial results for a year hampers the investor confidence and leaves inves-tors with lack of reliable information for taking their financial decisions.
In order to enhance responsible behaviour of auditors and strengthen the disclosures to inves-tors and stakeholders, it is proposed that if the auditor has signed the audit report for all quarters of a financial year, except the last quarter, then the auditor shall finalise the audit report for the said financial year before such resignation, the Sebi said.
In all other cases, the auditor shall issue limited review/audit report for that quarter before such resignation—which means if a decision is taken to resign in August, the auditor shall issue the limited review/audit report for the September quarter before quitting.
The regulator asked public comments on the proposals latest by August 8.
“There have been a significant number of instance of abrupt resignation of statutory auditors from listed entities in recent times. In most of the cases, the statutory auditors have suddenly resigned without completing their assignments for the year, generally citing ‘pre-occupation’ as the reason for resignation,” the Sebi said.
However, resignation of an auditor due to reasons such as pre-occupation before completion of the audit of the financial results for the year seriously hampers the investor confidence and leaves the investors with lack of reliable information for taking their financial decisions.
With respect to the auditor of a material unlisted subsidiary of the listed entity, the auditor shall issue the limited review/ audit report for that financial year/ quarter, as applicable, before such resignation (i.e. previous financial year/ quarter in reference to the date of resignation).
If the auditor's resignation is because of non-availability of information, then the proposed format should also include information like details of information requested by the auditor which was not made available to it.
(With inputs from agencies)
