The Securities and Exchange Board of India (Sebi) has tightened rules for the resignation of statutory auditors from listed companies or their material subsidiaries.
In a circular on Friday, the market regulator said prompt disclosures should be made about the reasons for the resignation. It added that if an auditor had any concern about the management of a listed entity or a material subsidiary such as non-availability of information or non-cooperation by the management which may hamper the audit process, the auditor should approach the chairman of the audit committee of the firm.
In such cases, the latter should receive such concern directly and immediately without waiting for the quarterly audit committee meetings.
In July, Sebi had posted a consultative paper on the subject amid growing instances of statutory auditors resigning from listed companies, while some came under the scanner in connection with alleged financial irregularities at firms. The new rules will come into force with immediate effect.
Sebi feels if an auditor resigns before completing the audit of the financial results for the year because of reasons such as pre-occupation, it may hamper investor confidence and deny them access to reliable information for taking investment decisions.