SEBI lays down stricter norms for Statutory Auditors

Regulator Sebi put in place stricter norms for auditors, including prompt disclosures about reasons for their resignation and requirement to approach chairman of audit committee directly in case of any concerns with management of the firm concerned. The norms have been issued against the backdrop of rising instances of auditors quitting companies as well as those of auditors coming under the scanner in connection with alleged financial irregularities at firms.

The circular on 'Resignation of statutory auditors from listed entities and their material subsidiaries' will come into force with immediate effect.

According to Sebi, resignation of an auditor of a listed entity before completion of the audit of financial results for the year due to reasons such as pre-occupation may seriously hamper investor confidence and deny them access to reliable information for taking timely investment decisions.

Coming out with the circular, Sebi has asked all listed entities and material subsidiaries to ensure that an auditor issues the audit report, if he or she is tendering resignation, within 45 days from the end of a quarter.

Besides, those resigning after 45 days from the end of a quarter have to issue audit reports for the quarter concerned as well as the successive quarter.

The auditors who have signed the limited review or audit report for the first three quarters of a financial year, before resignation need to issue the audit report for the last quarter as well as for the complete financial year, Sebi said in a circular.

However, an auditor who has rendered as disqualified as per the relevant provisions of the Companies Act, would not be required to comply with the directions.

"In case the auditor proposes to resign, all concerns with respect to the proposed resignation, along with relevant documents shall be brought to the notice of the Audit Committee," the circular said.

As per the norms, an auditor has to approach the chairman of the audit committee in case of concern with the management of firm such as non-availability of information or non-cooperation by the management that may hamper the audit process.

"The audit committee shall receive such concern directly and immediately without specifically waiting for the quarterly audit committee meetings," Sebi said.

The committee upon resignation of the auditor, will deliberate upon the concerns raised by the auditor regarding the resignation as soon as possible, and not later than the date of the next audit committee meeting and communicate its views to the management. #casansaar (Source - PTI, MoneyControl)