Amid reports that hundreds of auditors employed by listed companies have quit over the past year, the registrar of companies (RoC) has tightened norms by asking them to explain the specific reasons for tendering resignations as ambiguous reasons like ‘pre-occupation’ are untenable.
“It is stated that pre-occupation as a ground for resignation of auditor is not tenable since you have consented for being the auditor of the company yourself. You are hereby required to explain your resignation given on ‘pre-occupation’ ground within seven days,” a letter to one auditor from the office of registrar of companies in
Gujarat said.
On resigning, the auditor is required to file a return in e-form ‘ADT-3’ with the RoC concerned and is required to furnish the reasons for the resignation. Under the provisions of Companies Act, 2013, an auditor who finds during an audit that fraud has been committed by the company or its employees should report the matter immediately to the central government.
According to a report in The Indian Express, auditors in as many as 204 listed companies had submit0ted their resignations between January 1 and July 17 last year. The trend is being investigated by the ministry of corporate affairs. “The auditor often resigns after the company fails to divulge all the necessary vouchers and other financial information required for clean statutory audit. In many cases, the auditors are forced to take a call hours before signing up on the annual audit report, as the required relevant information is withheld by the companies,” Rajat Mohan, partner at AMRG & Associates, said.