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SEBI to Take Firm Steps Against Abrupt Resignation of Auditors

SEBI to take steps against abrupt resignation of auditors

To curb abrupt resignation of auditors, new SEBI norms made it mandatory for auditors of listed companies to issue an audit report even if they resign

SEBI has brought strict rules and regulations into effect against the auditors resigning from listed companies. From now on Auditors will have to give a detailed explanation of their resignation to stock exchange at the earliest. Resignation of an Auditor before completion of the audit of financial results for the year seriously affects the confidence of investors.

As per SEBI[1], an auditor will have to provide a limited or complete audit report for the quarter during which it resigns. Furthermore, if the auditor signs audit report for all the quarters of the financial year, except for the last quarter, then the auditor will have to finalize the audit report for the entire financial year.

In a situation where the listed company refuses to provide the required information, the auditor should give a proper disclaimer in the audit report. In another case, if the management of the company obstructs the audit process, the auditor needs to speak to the chairman of the audit committee of the Company.

Abrupt resignations of auditors hamper the confidence of investors. Investors are left with no accurate details about their monetary decisions. In the past years, the sudden resignation of statutory auditors in the listed companies has gone up.

SEBI had a close look at this matter and, therefore decided to take strict actions against the defaulters. According to data provided by NSE Infobase the year 2018, saw mid-term resignation of 48 auditors and another 16 so far this year.

New guidelines to curb abrupt resignation of auditors by SEBI

  • All listed companies are asked to make sure that an auditor issues the audit report if he or she is planning to resign within 45 days from the end of the quarter.
  • Auditors those who decide to resign after 45 days from the end of the quarter have to issue audit reports for the quarter as well as the successive quarter.
  • Auditors those who have signed the audit reports for the first three quarters will have to issue the audit report for last quarter as well as for the complete financial year before the resignation
  • The Auditors those who are disqualified as per the provision of the Companies Act will not be required to follow the directions.
READ  What is Procedure for Removal of Statutory Auditor from a Company?


Auditors play an essential role in gaining funds for the company. In recent years there have been numerous cases of auditors resigning mid-way of the financial year. Now after SEBI’s circular it will be interesting to see how the circular gets implemented.


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