Securities & Exchange Board Of India Issues Circular With New Rules To Regulate The Process Of Auditor Resignations
[ By Bobby Anthony ]The Securities and Exchange Board of India (SEBI) has issued new rules in the form of a recent circular to regulate the process of resignation of auditors.The SEBI circular contains new rules which will apply to all listed companies and their material subsidiaries. The circular prescribes obligations of auditors and audit committees of listed companies. In the absence of...
The Securities and Exchange Board of India (SEBI) has issued new rules in the form of a recent circular to regulate the process of resignation of auditors.
The SEBI circular contains new rules which will apply to all listed companies and their material subsidiaries. The circular prescribes obligations of auditors and audit committees of listed companies. In the absence of an audit committee, the compliance on behalf of a company must be done by the board of directors, as per the SEBI circular.
The SEBI has noted that resignation of auditor before completion of audit could hamper investor confidence and hence recognized the need to regulate the process.
According to the circular, if an auditor resigns within 45 days of completion of a quarter, he or she must issue limited review or audit report for such quarter. If the auditor resigns after 45 days from the end of a quarter, he or she must issue the limited review or audit report for the next quarter as well.
If the auditor has signed a limited review or audit report for the first three quarters of a financial year, then he or she would be obligated to issue an audit report for the full financial year.
The circular has stipulated that the auditor must approach the chairman of the company’s audit committee immediately in order to ensure quick resolution of any concerns like lack of information or non-co-operation by the management.
It has been stipulated that in the event of a proposed resignation, all concerns should be communicated by the auditor to the audit committee and the committee’s views to the management.
The circular has mandated that an appropriate disclaimer should be made in the audit report, as per audit standards prescribed by ICAI or NFRA if the listed company or its material subsidiary has not provided information required by the auditor.
It has also been mandated that an auditor resignation must be deliberated on by the audit committee as soon as possible, not later than its next meeting.
Thereafter, the audit committee has to share its views with the company’s management and these views should be shared by the listed company with the stock exchanges in twenty-four hours after the date of the audit committee meeting, as per the SEBI circular.