Market regulator SEBI proposes to strict the disclosure norms with respect to resignations of statutory auditors in listed companies.
“Resignation of an auditor is understandable and accepted in exceptional circumstances”.
However, It has been observed that the statutory auditors generally use the option of “‘pre-occupation’ as the reason for resignation and they suddenly resigned without completing their audit assignments for the financial year.
Due to the sudden resignation of the auditors, it is difficult for the investor to take their decisions because of the lack of reliable and accurate information and also hampers their confidence.
The proposed action of SEB includes
- In case auditor has made audit report of the three quarters of a financial year but the report of last quarter is pending, then the auditor should finalize the audit report for the remaining quarter before giving resignation.
- In other case, the auditor is required to furnish the audit report for the quarter before the resignation.
- An auditor would have to provide appropriate disclaimer in case of auditor’s resignation is due to nonreceipt of information.
- To strengthen and clarify the role of audit committees of the audit firm.
- In case of non – availability of information, a format to be followed by the auditor that will include:
- Detailed reasons for resignation,
- Declaration by the auditor that there are no other material reasons other than those provided for resignation,
- Details in case of inability to obtain sufficient appropriate audit evidence was due to a limitation imposed by management or circumstances beyond the control of the management,
- Effort made by the auditor prior to resignation (like approaching the audit committee).
- Listed entity shall ensure intimation of resignation letter to the stock exchanges containing the proposed information.
- Listed entity shall ensure the disclosure of Audit committee’s views of resignation to the stock exchanges.
It is further proposed that In case of any concern/ issue with the management, the auditor shall approach the chairman of the audit committee directly.
The issued may be related to as non-availability of information, not providing sufficient evidence any non-cooperation by the management.
The auditor shall not specifically wait for the quarterly meetings to take place in order to raise such concerns.
Note : The regulator asked for public comments or feedbacks on the proposals latest by August 8, 2019.