Seeking to push the companies to act on issues flagged by their auditors,market regulator Sebi today asked them to immediately inform the investors about any restatement of their books of accounts necessitated by points raised by the audit process. 

The latest direction follows Sebi's guidelines issued in August last year, wherein the listed companies were asked to provide details of the issues red-flagged by their auditors in separate 'Qualified Annual Audit Reports (QAARs)'. 

Sebi has also set up a 'Qualified Audit Review Committee', having representatives from Institute of Chartered Accountants of India ( ICAI) and stock exchanges among others, to review and analyse these QAARs. The Committee can suggest necessary changes in the financial accounts of the companies. 

Sebi said in a circular today that it has received various queries about these QAARs, wherein the companies have sought to know about such restatement of books of accounts. 

The regulator clarified that the company would be required to disclose the effect of revised financial accounts immediately to the shareholders through stock exchange filings. 

However, the financial effects of the revision can be carried out in the annual accounts of the subsequent fiscal as a prior period item so that the tax impacts can be taken care of, Sebi said. 

Sebi had asked all listed firms to submit separate documents for adverse observations made against them by auditors in a bid to tighten noose around companies trying to hide issues raised by auditors in their voluminous annual reports. 

Stock exchanges have also been asked to conduct immediate scrutiny of the issues highlighted in these documents and seek necessary clarifications from the concerned companies about the observations made by auditors. 

As per these guidelines, Sebi can ask the companies to restate financial accounts, if the auditors' observations are found to be serious in nature. 

Prior to these guidelines, all listed companies were required to submit the copies of annual reports containing audited financial statements to the stock exchanges. 

However, many serious issues about the companies' accounts, including possible cases of fraud, were found to be going unnoticed even if they have been flagged off by auditors, as such observations are generally buried deep inside the bulky documents like annual reports. 

The Committee report said: "RBI should prepare a single balance sheet which displays separately the assets and liabilities of the Issue Department. It is possible to disclose the assets and liabilities of the Issue Department separately within a single balance sheet." 

RBI prepares two balance sheets. One relates to the sole function of currency management and is presented as the balance sheet of the Issue Department. The other one reflects the impact of all other functions of the Reserve Bank and is known as the balance sheet of the Banking Department. 

With regard to accounting policies, the Committee has suggested that RBI should prepare its financial statements generally in accordance with IAS (International Accounting Standards) or IFRS (International Financial Reporting Standards). It may, however, make such departures as it considers appropriate, it added. 

The Committee also recommended that the figures in the balance sheet and income statement should be in crores of rupees and up to two decimal points. Currently, the statements present figures in 'billion'. 

The RBI had set up a technical committee under Y H Malegam in 2012 to examine the form of presentation of its financial statements, profit and loss account and the style and content of the management commentaries and notes to the accounts of the balance sheet as well as make recommendations to effect changes, if necessary. (Economic Times)