The capital market regulator, Securities and Exchange Board of India (SEBI) is looking to bar audit firms from certifying accounts of listed companies for a certain period if accounts of books, certified by them earlier, are found to have been manipulated.
The decision by SEBI follows a recommendation to this effect by its Primary Market Advisory Committee (PMAC) to improve disclosure norms for companies coming out with public offer of shares.
‘SEBI should penalise the audit firms that have certified the books of accounts of companies which were later found to have been manipulated, including debarring them for a specified period from certifying the accounts of listed companies,’ the PMAC suggested.
The role of audit firms came under the scanner following the country’s biggest accounting scam at the erstwhile Satyam Computer over three years ago. Along with the company’s then top management team, auditors were also accused for their lack of oversight in certifying it books of account.
In a circular issued on 13 August, SEBI also asked the bourses to conduct immediate scrutiny of issues highlighted in these documents and seek necessary clarifications from the concerned companies about the observations made by auditors.
All listed companies are required to submit the copies of annual reports containing audited financial statements to the stock exchanges. However, many serious issues about the companies’ accounts, including possible cases of fraud, can go unnoticed even if they have been flagged by auditors, because such observations are generally buried deep inside the bulky documents like annual reports. The new guidelines would be applicable to all annual audited financial results submitted by the companies for the period ending on or after 31 December 2012.
The decision by SEBI follows a recommendation to this effect by its Primary Market Advisory Committee (PMAC) to improve disclosure norms for companies coming out with public offer of shares.
‘SEBI should penalise the audit firms that have certified the books of accounts of companies which were later found to have been manipulated, including debarring them for a specified period from certifying the accounts of listed companies,’ the PMAC suggested.
The role of audit firms came under the scanner following the country’s biggest accounting scam at the erstwhile Satyam Computer over three years ago. Along with the company’s then top management team, auditors were also accused for their lack of oversight in certifying it books of account.
In a circular issued on 13 August, SEBI also asked the bourses to conduct immediate scrutiny of issues highlighted in these documents and seek necessary clarifications from the concerned companies about the observations made by auditors.
All listed companies are required to submit the copies of annual reports containing audited financial statements to the stock exchanges. However, many serious issues about the companies’ accounts, including possible cases of fraud, can go unnoticed even if they have been flagged by auditors, because such observations are generally buried deep inside the bulky documents like annual reports. The new guidelines would be applicable to all annual audited financial results submitted by the companies for the period ending on or after 31 December 2012.