The Securities and Exchange Board of India (SEBI) on Thursday proposed disclosure of auditors of the listed companies. The proposal comes on the wake of firms resigning abruptly from the audit assignments without enough reasons.
SEBI is mulling for a format to disclose reasons if an auditor of a listed company resigns, including the information of details the auditor could not get from the firm.
Many auditors resigned from companies in the last year stating that they have not received cooperation from the management. They have also complained of not receiving enough workforce to close the assignments.
Several auditors have resigned audit assignments at firms that had fraud allegations and governance issues. It was common to see auditors leaving the audits of small companies previously. But the concern is that the auditors are resigning from the mid and large companies since last year.
The SEBI has proposed that the inputs of the auditing committee and the board of directors must disclose in a consultation paper to the stock exchange with the resignation letter of the auditor.
The market regulator also said that an auditor who has audited three quarters of a fiscal year must not quit until the audit of the final quarter is done, and a report is handed over. The auditor is needed to furnish a limited review or the audit report for the fiscal quarter prefacing the resignation.
SEBI has proposed that the auditor should directly approach the audit committee immediately on cite of any concerns with the firm’s management, with no requirement of having to wait until the quarterly meeting. They need to inform about the non-disclosure of the information from the firm and reasons for resignation.
The audit committee will then ponder on the concerns raised by the auditor and give its feedbacks to both auditor and management. The company will then have to disclose its views to the stock exchange. SEBI is open to receive public comments till August 8 2019.
Engineer by qualification, financial writer by choice. I am always open to learning new things.