The Securities Exchange Board of India (SEBI) has proposed to stringent the rules for auditors and Valuers hired by listed companies for auditing financial results as the Auditing lapses have caused several frauds to go unnoticed for years and there is no direct control by SEBI on the auditing firms.
Last year, the Kotak Committee, formed to for making proposals on improving corporate governance, suggested the Capital market Regulator have clear powers to act against auditors and other third-party individuals or firms with statutory duties under the securities law.
Recently, Auditing lapses have caused several frauds, including the most recent PNB scam, to go unnoticed for years and the capital market regulator has had no direct control over the auditing firms.
As per the new rules, the SEBI proposed to give the Board of Directors of the Company the power to take appropriate action after conducting an investigation against the individual or firm that violates any regulations or submits a false certificate or report.
Currently, the Merchant bankers, credit rating agencies, custodians, among others, are registered and regulated by SEBI but chartered accountants, company secretaries, valuers and monitoring agencies etc., still out of its jurisdiction.
The amendment would suggest the auditors to ensure certificates or reports issued by them are true in all material respects and they must exercise all due care, skill, and diligence with respect to all processes involved in the issuance of the report or certificate.
As per the amendment, the auditors are bound to submit a report in writing to the audit committee of the listed company or the compliance officer on any violation of the securities law they noticed.
In January, Sebi barred the audit giants, Price Waterhouse from auditing listed companies in India for two years after an investigation into a nearly decade-old accounting fraud case in a software services company that became India’s biggest corporate scandal.
