ICAI group studying circumstances leading to auditor resignations

Amid rising instances of auditors quitting audit work at companies, chartered accountants' apex body ICAI has set up a group to look into the circumstances leading to their resignations.

In a communication to members, ICAI President Naveen N D Gupta also said the panel would also analyse the recent circular issued by the Reserve Bank on enforcement framework for statutory auditors of commercial banks.

The Institute of Chartered Accountants of India (ICAI) has more than 2.80 lakh members and many of the institute conduct audit works for various companies.

In recent times, scores of auditors have left audit work of companies, mostly listed ones, citing various reasons. The Corporate Affairs Ministry is also looking into various cases to ascertain whether there have been any violations of companies law.

A group has been formed to "examine the circumstances leading to the resignation of auditors, and also to analyse the recent circular of RBI on enforcement action framework", Gupta said in his latest monthly message posted on the ICAI website.

The group would also suggest a suitable mechanism to address the issues/ concerns for guidance of the members, he noted.

In June, the Reserve Bank of India (RBI) came out with a circular titled 'Enforcement action framework in respect of statutory auditors for lapses in statutory audit of commercial banks'.

"... it has been decided to put in place a graded enforcement action framework to enable appropriate action by the RBI in respect of the banks statutory auditors for any lapses observed in conducting a statutory audit," RBI had said.

It also came against the backdrop of increasing non-performing assets in the banking system.

Besides, the ICAI has constituted a group to look into the consultation paper issued by markets regulator Sebi on fiduciaries in the securities market.

Under the norms for fiduciaries proposed by Sebi, defaulters would face stringent penal actions, including ban from securities markets and disgorgement of fees.

Those found guilty of providing wrong audit or valuation reports would have to cough up any unlawful gains they might have made in the process, as per the proposals.