Auditors to be more accountable in resignation?

SEBI released a consultation paper last week proposing few changes to help investors understand the auditor resignation process and make the companies more accountable and transparent to shareholders.

Following proposals are notable in the paper :
1. Listed companies shouldn't provide only selective excerpts or their own interpretation of the resignation letter of an auditor but disclose the entire letter to stock exchanges. This is a welcome step as partial information with respect to auditor resignation led to many rumours among market participants along with brewing negative sentiment for stock price.
2. No resignation can be sudden and audit work for previous and current quarter in which resignation is given need to be completed by the audit company. In case resignation is due to a non-cooperating management, it is proposed that  the auditor issue a limited review audit, or qualify the audit report to that extent. This step will lead to more accountability as many resignations in last year have kept investors in the dark with respect to exact reasons.
3. The Audit committee and the board of directors will disclose to the exchange their "own version" of auditor's resignation (giving suitable reasons). This would bring the auditor to the notice of the audit committee its concerns on the topic of resignation.
Even though we are surprised why a consultation paper is floated by the SEBI instead of a circular directing all the listing companies to follow the above points but its better late than never scenario playing out. Tremendous amount of wealth has been lost in stock market as many companies auditors have resigned suddenly without suitable explanation. With the above mentioned changes, some transparency will bring in level field for investors and shareholders.

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