Mumbai: Market regulator Sebi has
proposed that auditors of listed firms need to issue "limited review or
audit report" for the previous quarter before they resign.
According to a consultative paper by the Securities and Exchange Board of India (Sebi), there have been a significant number of instances of abrupt resignation of statutory auditors from listed entities in recent times.
"In most of the cases, the statutory auditors have suddenly resigned without completing their assignments for the year, generally citing 'pre-occupation' as the reason for resignation," the consultative paper said.
"However, resignation of an auditor due to reasons such as pre-occupation before completion of the audit of the financial results for the year seriously hampers the investor confidence and leaves the investors with lack of reliable information for taking their financial decisions," it said.
The paper proposed: "If the auditor has signed the audit report for all the quarters of a financial year, except the last quarter, then the auditor shall finalise the audit report for the said financial year before such resignation."
"In all other cases, the auditor shall issue limited review/audit report for that quarter before such resignation."
As per the consultative paper, if the reason for the auditor's resignation is that the entity has not provided information, then the auditor "shall provide an appropriate disclaimer in the audit report to that extent".
The regulator has called for public comments on the proposals.