No statutory auditor can leave the job in between, proposes SEBI in its new guidelines

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Published: July 18, 2019 6:39:16 PM

SEBI has revised guidelines in view of the rising number of abrupt resignations of statutory auditors from listed companies in recent times, proposing that no auditor can leave the job without completing the quarterly reviews.

Securities and Exchange Board of India, Sebi, auditor, guidelines, resignation, proposals, pre-occupationPre-occupation is the most common reason among the auditors, who have suddenly resigned without completing their annual assignments. (Bloomberg image)

SEBI has revised guidelines in view of the rising number of abrupt resignations of statutory auditors from listed companies in recent times, proposing that no auditor can leave the job without completing the quarterly reviews. Pre-occupation is the most common reason among the auditors, who have suddenly resigned without completing their annual assignments. The role of auditors is significant in ensuring unbiased, accurate, complete and timely disclosure of many important pieces of information, that need to be passed on to investors and other stakeholders in the securities market. 

“With reasons such as pre-occupation, the resignation of an auditor before completion of the audit of the annual financial results hampers the investors’ confidence and leaves the investors in dark”, according to SEBI.

Key policy proposals:

  • If the auditor of a listed entity or unlisted subsidiary of the listed entity proposes to resign and if he has signed the audit report for all the quarters, except the last quarter of the current financial year, the auditor shall finalise the audit report for the financial year before such resignation.
  • In all other cases, the auditor shall issue limited review or audit report for that quarter before such resignation.
  • If not providing information by the entity is the reason behind the auditor’s resignation, the auditor shall provide an appropriate disclaimer in the audit report to that extent.
  • Detailed reasons for resignation, a declaration by the auditor that there are no other material reasons other than those provided and in case of any concerns, efforts made by the auditor prior to the resignation are compulsory to be mentioned in the resignation, which has to be in a prescribed format. 
  • In case the information was not provided by the firm, the auditor has to mention the details of the information requested, the reason for the inability to provide the information, assessment of the severity of the information, etc in the resignation.
  • In case of any concerns with the management such as non-availability of information or any non-cooperation, the auditor shall approach the Chairman of the Audit Committee directly and immediately.

 

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