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Sebi tightens norms for resignation of auditors
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SME Times News Bureau | 19 Oct, 2019
In the wake of a number of resignations in listed companies off late,
the Securities and Exchange Board of India (Sebi) on Friday floated
stricter disclosure norms for resignation of auditors.
In a
circular, the regulator said that listed entities should disclose the
detailed reasons to stock exchanges in case of resignation of its
auditor within 24 hours of receiving the reasons from the auditor.
"Sub-clause
(7A) inserted under Clause A in Part A of Schedule III under
Regulation 30(2)of SEBI LODR Regulations requires detailed reasons to
be disclosed by the listed entities to the stock exchanges in case of
resignation of the auditor of alisted entity as soon as possible but not
later than twenty-four hours of receipt of such reasons from the
auditor," it said.
Further, the directive said the audit
committee of a listed entity has to make recommendations for the
appointment, remuneration and terms of appointment of the auditors.
"Under
Sub-clause (7), the Audit Committee is also responsible for reviewing
and monitoring the independence and performance of auditors and the
effectiveness of the audit process," it said.
It also said,
Regulation 36(5) of the Sebi's norms lays down certain disclosures to
be made part of the notice to the shareholders for an annual general
meeting, where the statutory auditors are proposed to be
appointed or re-appointed, including their terms of appointment.
"Resignation
of an auditor of a listed entity/its material subsidiary before
completion of the audit of the 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."
In the past two years, listed companies
have seen a slew of auditor resignations, and in some cases, they have
come just few weeks ahead of the announcement of financial results. The
auditor resignations have in these cases cited reasons ranging from lack
of information, to mutual exits.
The Sebi said that if the
auditor resigns within 45 days from the end of a quarter of a financial
year, then the auditor shall, before such resignation, issue the limited
review or audit report for such quarter.
Further, if the auditor
resigns after 45 days from the end of a quarter of a financial year,
then the auditor shall, before such resignation, issue the limited
review or audit report for such quarter as well as the next quarter.
"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," Sebi said.
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