industry

ICAI wants Sebi to review proposed norms for auditor resignations


Mumbai: The new framework proposed by market regulator Security and Exchange Board of India (Sebi) to tackle the issue of auditor resignations from listed companies by seeking more mandatory disclosures is seen as corralling chartered accountants at the expense of companies.

Institute of Chartered Accountants of India (ICAI) is readying a submission for Sebi in next two days asking the proposed norms about auditor resignations be reconsidered.

Sebi wants to curb abrupt resignations in listed companies and has proposed that auditors should give precise reasons for quitting, including if the auditor discovered any fraud and explain what action was taken. It also wants an auditor should continue for another quarter after the resignation, among other things.

“There is a focus on auditors and making it mandatory for auditors to disclose exact details of issues to the government would only put the auditor in trouble. If the auditor discovers a fraud, no one wants to question the company, as we have seen in several cases in last few months, but just the auditor,” said a person close to the development.

A committee appointed by ICAI wants Sebi to remove a particular point (point 6, Annex-B) altogether.

The point refers to how the auditor must resign. The auditor is required to give several details including, “whether the auditor could have performed alternative procedures to obtain appropriate evidence (from the company)… whether the auditor communicated the matter to the audit committee, whether the lack of information was prevalent in previous financial statements,” it says.

“What the Sebi is asking is not unfair. The only thing is that regulators have to understand that when an auditor chooses to walk out, it’s the last resort, and we need to be protected. If we put out exact reasons, who will judge who’s right, and who will protect us?” asked the audit head of one of the largest firms in the country.





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