Mumbai, October 22: From now onwards, statutory auditors will have to comply with stricter norms when it comes to their resignation. Market regulator, Securities and Exchange Board of India (Sebi) has recently issued a circular stating that auditors resigning from listed companies are required to give detailed reasons to stock exchanges at earliest. Sebi, in its consultative paper in the month of July, highlighted that resignation of an auditor before completion of audit of financial results for the year seriously hampers investor confidence.
Further this also leaves investors without correct information about their financial decisions. Recently, the number of instances related to abrupt resignation of Statutory Auditors has increased from the listed companies which has come to the notice of Sebi.
“Resignation of an auditor of a listed entity/ its material subsidiary 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,” read Sebi’s circular.
As per the norms, in case the auditor resigns within 45 days from the end of quarter of a financial year, then there’s a requirement to submit the limited review or audit report for such quarter. Further, any concern related to the management of the company, the auditor needs to approach the chairman of the audit committee for non-availability of information or non-cooperation by the management.
The statutory auditors are mandatory for any company and are appointed within 30 days of incorporation. As per the Companies Act, 2013, the accounts of a limited liability partnership (LLP) should undergo audit if its annual turnover is over Rs 25 Lakh or more as capital contribution. Auditors play a pivotal role when it comes to giving timely unbiased disclosures to investors and stakeholders in the securities market.