Extract from SEBI Board Meeting Minutes dated 26.06.2012
Manner of dealing with Audit Reports filed by listed entities
In order to enhance the quality of financial reporting done by listed entities, it has been decided to put in place, a mechanism to process qualified annual audit reports filed by the listed entities with stock exchanges and Annual Audit Reports where accounting irregularities have been pointed out by Financial Reporting Review Board of the Institute of Chartered Accountants of India (ICAI-FRRB). It has been, inter-alia, decided that:
- Deficiencies in the present process would be examined and rectified.
- SEBI would create Qualified Audit Report review Committee (QARC) represented by ICAI, Stock Exchanges, etc. to guide SEBI in processing audit reports where auditors have given qualified audit reports.
- Listed entities would be required to file annual audit reports to the stock exchanges alongwith the applicable Forms (Form A: ‘Unqualified’ / ‘Matter of Emphasis Report’; Form B: ‘Qualified’ / ‘Subject To’ / ‘Except For Audit Report’).
- After preliminary scrutiny and based on materiality, exchanges would refer these reports to SEBI/QARC.
- Cases wherein the qualifications are significant and explanation given by Company is unsatisfactory would be referred to the ICAI-FRRB. If ICAI-FRRB opines that the qualification is justified, SEBI may mandate a restatement of the accounts of the entity and require the entity to inform the same to the shareholders by making the announcement to stock exchanges.
Source- SEBI Board Meeting – PR No. 67/2012