SEBI vide its circular
dt: 18th October 2019 has provided for resignation of statutory
auditors from listed entities and their material subsidiaries
1) Critical actionables
Practicing Company Secretary shall certify compliance with
the provisions of this circular, as and when applicable, in their annual
secretarial compliance report to listed entity under February 8, 2019 circular.
Conditions mentioned in this circular need to be incorporated
in terms of appointment of auditors with
immediate effect. If any company is
not required to form audit committee then all the above mentioned compliances
are to be done by Board of Directors of respective company. Circular has come into existence with
immediate effect
2) When can a statutory
auditor resign?
Auditor can resign during any of the first three quarters (April
– June, July – September and October – December) by giving resignation within 45
days from the end of quarter. If he resigns within 45 days then he has to issue
limited review or audit report for that quarter.
Auditor can resign during any of the first three quarters
(April – June, July – September and October – December) by giving resignation
after completion of 45 days after the end of quarter. If he resigns after 45
days then he has to issue limited review or audit report for that quarter plus
that of next quarter before resigning. E.g. If auditor resigns on 17th
August 2019 then he will have to issue limited review/audit report for June
quarter and September quarter also.
For the last quarter if he resigns within 45 days from end of
quarter or after 45 days from end of quarter then he cannot resign unless he
issues and signs audit report for the entire financial year. Effectively if an auditor resigns post
November during any financial year then he will have to do audit for the entire
year.
3) Disclosures by the
company
Listed entity/its material subsidiary shall upon resignation
of auditor obtain information from him in ‘annexure A’ format as given in this
circular. Also listed entity shall disclose same as Reg 30(2) of SEBI (LODR) Regulations.
Upon resignation of auditor audit committee shall deliberate upon
all concerns raised by the auditor with respect to resignation as soon as
possible but not later than date of next audit committee meeting. Audit
committee shall also communicate its views to management. Listed entity shall disclose audit committees
views to stock exchange within twenty four hours after the date of such audit
committee meeting.
4) Role of Chairman of
Audit Committee
If the auditor has any concerns which may hamper audit
process then the auditor shall approach the Chairman of Audit committee of the
listed entity/its material subsidiary who shall further call for audit committee
without waiting for quarterly audit committee meetings where it shall receive
such concerns directly and immediately.
5) Role of Audit
Committee
In case an auditor proposes to resign then all concerns with
respect to such resignation shall be brought to the notice of audit committee. Auditor
shall inform audit committee of details of information sought or explanation
demanded and not given by management. Audit committee shall deliberate on
auditor’s proposal to resign and communicate its views to management and auditors.
6) Auditors right to disclaim
its report
In case the listed entity/its material subsidiary does not
provide information then auditor shall provide an appropriate disclaimer in
audit report.
Copy of circular is attached herewith
for reference
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