The government is looking to tighten the noose around auditors and directors, who quit the company when it lands into trouble — often citing “personal reasons”.

The move follows several exits by audit firms from troubled companies, ranging from Nirav Modi’s outfits — where Deloitte opted out, to Vakrangee — where the ministry of corporate affairs has ordered a probe after PriceWaterhouse resigned.

Similarly, directors often resign at the slightest sign of trouble, including some of the promoters who are seen to be abandoning the ship.

Sources told TOI that the National Financial Reporting Authority (NFRA), the recently appointed independent watchdog for auditors of large and listed companies, will be asked to review the audit standards that are no longer under the government’s purview but had moved to the Institute of Chartered Accountants of India.

“NFRA can look at it and suggest how we make auditors more accountable. Under the law, an audit firm, which is a custodian, cannot simply walk out of an assignment that has been given by the shareholders. If there are concerns, they need to be reported properly and a mere note at the bottom of the accounts won’t do,” said an official, who did not wish to be identified.

The move follows deliberations in the ministry of corporate affairs, which had sought reasons for large scale auditor resignations in companies, with an estimated 200 auditors having resigned so far this year. But, the response hasn’t helped the government get much idea beyond the need to change standards.

Similarly, in case of directors, the government plans to tighten reporting norms with a new form being readied, where more disclosures are planned. This will then be matched with other resignations and help keep track of directors.

“Often directors cite personal reasons for exits. Just doing that is not going to help,” said an official. Another officer said in one case, a prominent independent director recently resigned citing “health reasons” but took up a new assignment after a few months. “You can’t be unwell to be director on the board of one company but be fit to take another directorship,” the second official added. In recent months, the ministry of corporate affairs is seeking to strengthen governance standards as part of the government’s clean-up drive for India Inc. #casanaar (Source - Times of India)