Resignation of Statutory auditors from Listed Entities & their Material Subsidiaries
As preamble of the Securities and Exchange Board of India describes, its basic function to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto, Board mandated to listed entities and it’s Material Subsidiaries to ensure compliances upon resignation of the statutory auditor with respect to limited review/audit report.
Resignation of an auditor of a listed entity or its material subsidiary before completion of the audit of the financial results for the year due to reasons such as pre-occupation may seriously hamper investor confidence and deny them access to reliable information for taking timely investment decisions.
In light of the above, all listed entities or its material subsidiaries shall ensure while appointing/re-appointing an auditor that:
1. 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
2. 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.
3. In spite of the above, if the auditor has signed the limited review/audit report for the first three quarters of a financial year, then the auditor shall, before such resignation, issue the limited review/audit report for the last quarter of such financial year as well as the audit report for such financial year.
Reporting of concerns
Disclaimer of non-receipt of information
Obligation on Listed Entity/Material Subsidiary:
1. Listed entity/material subsidiary ensure that above conditions are included in the terms of appointment of the statutory auditor at the time of appointing/reappointing the auditor. In case the auditor has already been appointed, the terms of appointment shall be suitably modified to give effect to the above.
2. 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.
3. Listed entity/its material subsidiary shall obtain information from the Auditor in the format specified*and ensure disclosure of the same under Sub-clause (7A) of Clause A in Part A of Schedule III under Regulation 30(2) of SEBI (LODR) Regulations, 2015.
4. 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.
5. The listed entity shall ensure the disclosure of Audit Committee’s View to the stock exchanges as soon as possible but not later than twenty-four hours after the date of such Audit Committee meeting.
Certification by PCS in the Annual Secretarial Compliance Report:
The practicing company secretary shall certify compliance by a listed entity with respect to conditions above in the annual secretarial compliance report issued to the company.
Non applicability of the provisions : If auditor is rendered disqualified due to operation of any condition mentioned in Section 141 of the Companies Act, 2013.
Format of information to be obtained from the statutory auditor upon resignation
1. Name of the listed entity/material subsidiary:
2. Details of the statutory auditor:
c. Phone number:
3. Details of association with the listed entity/ material subsidiary:
a. Date on which the statutory auditor was appointed:
b. Date on which the term of the statutory auditor was scheduled to expire:
c. Prior to resignation, the latest audit report/limited review report submitted by the auditor and date of its submission.
4. Detailed reasons for resignation
5. In case of any concerns, efforts made by the auditor prior to resignation (including approaching the Audit Committee/Board of Directors along with the date of communication made to the Audit Committee/Board of Directors)
6. In case the information requested by the auditor was not provided, then following shall be disclosed:
a. Whether the inability to obtain sufficient appropriate audit evidence was due to a management-imposed limitation or circumstances beyond the control of the management.
b. Whether the lack of information would have significant impact on the financial statementresults.
c. Whether the auditor has performed alternative procedures to obtain appropriate evidence for the purposes of audit/limited review as laid down in SA 705 (Revised)
d. Whether the lack of information was prevalent in the previous reported financial statementresults. If yes, on what basis the previous audit/limited review reports were issued.
7. Any other facts relevant to the resignation:
1. I/ We hereby confirm that the information given in this letter and its attachments is correct and complete.
2. I/ We hereby confirm that there is no other material reason other than those provided above for my resignation/ resignation of my firm.
Signature of the authorized signatory
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DISCLAIMER: Views expressed are that of the author based on the provisions of various regulations and circular issued as on the date of compilation by author for general informational use of the reader and should not be basis for action. For any actions expert opinion must be sought separately, author shan’t be liable for any actions/omission opinions framed by the user on the basis of this article in any circumstances.