Provisions- Resignation of Auditor from Listed Companies- Series 523
In this editorial author shall discuss the provisions of Resignation of Auditor under Companies Act, 2013 read with SEBI Guidelines. SEBI on October 18th, 2019 issued circular relating to Resignation of Auditor from Listed Companies and their Subsidiaries. These guidelines are stating compliance required to be done by Resigning auditor and Company.
Companies Act, 2013 ‘Legal Provision’
As per Section 140 (2) The auditor who has resigned from the company shall file within a period of thirty days from the date of resignation, a statement in the prescribed form with the company and the Registrar, and in case of companies referred to in sub-section (5) of section 139, the auditor shall also file such statement with the Comptroller and Auditor-General of India, indicating the reasons and other facts as may be relevant with regard to his resignation.
SEBI Circular Dated October 18, 2019
A. COMPLIANCES BY AUDITOR:
1. Complete Audit as follow:
i. If the auditor resigns within 45 days from the end of a quarter of a financial year: then the auditor shall, before such resignation, issue the limited review/ audit report for such quarter
ii. If the auditor resigns after 45 days from the end of a quarter of a financial year: then the auditor shall, before such resignation, issue the limited review/ audit report for such quarter as well as the next quarter
2. Reporting Concerns as follow:
iv. In case the auditor proposes to resign, all concerns with respect to the proposed resignation, along with relevant documents shall be brought to the notice of the Audit Committee
v. In cases where the proposed resignation is due to non-receipt of information / explanation from the company, the auditor shall inform the Audit Committee of the details of information / explanation sought and not provided by the management, as applicable
vi. In case the listed entity/ its material subsidiary does not provide information required by the auditor, to that extent, the auditor shall provide an appropriate disclaimer in the audit report, which may be in accordance with the Standards of Auditing as specified by ICAI / NFRA
B. COMPLIANCE BY LISTED COMPANY:
i. Detailed reasons to be disclosed by the listed entities to the stock exchanges in case of resignation of the auditor of a listed entity as soon as possible but not later than twenty-four hours of receipt of such reasons from the auditor
ii. certain disclosures to be made part of the notice to the shareholders for an AGM, where the statutory auditors are proposed to be appointed/re-appointed, including their terms of appointment.
iii. Entity shall obtain information from retiring auditor in Annexure A of the circular.
iv. Co-operation by listed entity and its material subsidiary: During the period from when the auditor proposes to resign till the auditor submits the report for such quarter / financial year as specified above, the listed entity and its material subsidiaries shall continue to provide all such documents/information as may be necessary for the audit / limited review
v. Disclosure of Audit Committee’s views to the Stock Exchanges: Upon resignation of the auditor, the Audit Committee shall deliberate upon all the concerns raised by the auditor with respect to its resignation as soon as possible, but not later than the date of the next Audit Committee meeting and communicate its views to the management.
vi. The listed entity shall ensure the disclosure of the Audit Committee’s views to the stock exchanges as soon as possible but not later than twenty-four hours after the date of such Audit Committee meeting
In case the auditor is rendered disqualified due to operation of any condition mentioned in Section 141 of the Companies Act, 2013, then the provisions of this Circular shall not apply.
(Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at email@example.com)
Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Though utmost efforts has made to provide authentic information, it is suggested that to have better understanding kindly cross-check the relevant sections, rules under the Companies Act, 2013. The observations of the author are personal view and the authors do not take responsibility of the same and this cannot be quoted before any authority without the written
i.  In case an entity is not mandated to have an Audit Committee, then the board of directors of the entity shall ensure compliance of this circular