The statutory auditors are to follow much stricter norms to resign from their audit assignments going forward. The market watchdog Securities and Exchange Board of India (SEBI) has issued a circular which says that auditors need to furnish detailed reasons to stock exchanges for their resignations from the listed companies at the earliest.
SEBI had highlighted in its consultative paper in July that auditors resigning from their audit assignments of a listed company before completing the audit of the financial developments of the year thwarts the confidence of investors. This, in a way, is resulting in companies not getting enough investments for their expansion.
Sudden resignations from statutory auditors will put investors in a place where there are no accurate details about their monetary decisions. In the recent past, the number of statutory auditors resigning abruptly from their assignments in the listed companies has gone up, and the SEBI has noticed it.
According to the new regulations, if an auditor resigns 45 days prior to the quarter-end of the fiscal year, then the auditor is supposed to provide a limited review or an audit report for that quarter.
Also, if there are any concerns with respect to the management of the firm, then the auditor should get in touch with the head of the audit committee and brief him about the unavailability of details and non-cooperation from the company’s management.
Appointment of statutory auditors within 30 days of the establishment is compulsory for all companies. As per the rules of the Companies Act enacted in the year 2013, the accounts of all limited liability partnerships must be audited if their revenue exceeds Rs 25 lakh a year as the capital contribution.
Auditors play a critical role in listed companies raising funds for their growth and expansion. They provide timely and honest disclosure of details to stakeholders and investors in the securities bourse, which helps them make informed decisions.
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