The Securities and Exchange Board of India (SEBI) has proposed a strict disclosure norms pertaining to resignations of statutory auditors in listed companies.
Sebi said if the auditor submit their resignation within 45 days from the end of a quarter in a financial year, the auditor must generate the limited review or audit report for that quarter prior to the resignation.
And if the resignation is submitted after 45 days from the end of a quarter in a financial year, the auditor must present the limited review or audit report for that quarter and the next quarter before resignation submission.
“Notwithstanding the above, if the auditor has signed the limited review/ audit report for the first three quarters of a financial year, then the auditor shall, before such resignation, issue the limited review/ audit report for the last quarter of such financial year as well as the audit report for such financial year,” said Sebi in a circular posted on its website.
The regulator further said that in case of any challenge with the management of the listed body or material subsidiary namely non-availability of information or non-cooperation by the management which may hinder the audit process, the auditor should communicate with the chairman of the audit committee of the relevant listed company.
“..the audit committee shall receive such concern directly and immediately without specifically waiting for the quarterly Audit Committee meetings,” Sebi said.
“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. In cases where the proposed resignation is due to non-receipt of information / explanation from the company, the auditor shall inform the audit committee of the details of information / explanation sought and not provided by the management, as applicable,” Sebi said.
The regulator had asked for public comments on the said proposals for strengthening the disclosures to investors and clarify the role of the audit committee.