SEBI has, in a Consultative Paper dated 18 July 2019, proposed amendments to the SEBI (Listing Obligations and Disclosure Requirement) Regulations 2015 (LODR Regulations) with respect to resignation of auditors. Specifically, it has proposed disclosures to be made to investors and clarified the role of the Audit Committee in this regard. The proposals have been made in view of several instances of statutory auditors of listed entities resigning abruptly without completing the audit of financial results for the year, citing “pre-occupation” as the reason for doing so. As a result, investor confidence is hampered on account of lack of reliable information to base financial decisions on. The extant regulatory provisions on the subject under the Companies Act 2013, Companies (Audit and Auditors) Rules, 2014, LODR Regulations 2015 and the ICAI’s auditing standards (SA-705) do not address the aforesaid concern adequately. Hence, the paper makes the following proposals :
The paper amongst others, proposes to (a) arrest sudden resignations of auditors; (b) provide for a comprehensive disclosure of reasons by the auditor which lead to the decision to resign; (c) identification of whether information limitations (if any) are because of external factors or due to the management of the company. The sole objective of these proposals is to infuse some method to the madness being witnessed in the backdrop of frequent auditor resignations, irrespective of the time of the year.
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