Markets regulator Sebi has toughened disclosure norms for auditing firms to bring in transparency and protect investors from sudden auditor exits.
Sebi has made it mandatory for auditors, who wish to quit the entities they are auditing, to give detailed reasons for their resignation, and the same has to be disclosed to the exchanges by the company. The regulator has also made it tougher for auditors to resign before the end of their terms. Sebi has put the onus on the audit committee of listed companies and their subsidiaries in case an auditor resigns before the end of the term.In a circular issued on 18.10.19, Sebi said if the auditor resigns because the company failed to provide adequate information, it will have to explain if the details were not given due to any “management-imposed limits or circumstances beyond the control of the management”. The company will also have to disclose if the information was important to complete the auditing process, and also if such “lack of information was prevalent in the previous reported financial statements/results”. “If yes, on what basis the previous audit/limited review reports were issued.