India: SEBI's Policy Proposals To Curb Abrupt Resignations Of Auditors From Listed Companies

Last Updated: 24 July 2019
Article by Soumya Mohapatra and Aparna Bagree

Most Read Contributor in India, August 2019


The Securities and Exchange Board of India (SEBI) has observed that many statutory auditors of listed companies have abruptly resigned without completing their assignment for the year. Many a times, these resignations were sudden and the reasons were often vague, ranging from "pre-occupation" to "lack of adequate information from the company". For example, in June 2019, Price Waterhouse & Co. resigned as the auditor of Reliance Capital and Reliance Home Finance, stating that they did not receive substantive responses to their queries. Similarly, last year Deloitte Haskins & Sells quit as the auditor to Manpasand Beverages, due to lack of cooperation by the company on sharing data with the auditors.

Taking note of such resignations, whereby auditors have resigned without assigning detailed reasons, SEBI has proposed to tighten disclosure norms with respect to resignations of statutory auditors and has issued a 'Consultative Paper on Policy Proposals with respect to Resignation of Statutory Auditors from Listed Companies' dated 18 July 2019 (Paper), with an aim to address situations where an auditor decides to resign before fulfilling its responsibilities for the audit period it is appointed for, leaving investors and stakeholders devoid of reliable financial information about the listed companies and their unlisted material subsidiaries.

The Paper states "resignation of an auditor due to reasons such as pre-occupation before completion of the audit of the financial results for the year seriously hampers the investor confidence and leaves the investors with lack of reliable information for taking their financial decisions."

Key changes proposed

Enhancing responsible behaviour of auditors and strengthening disclosures to investors by the auditors

  • Placing conditions on auditors prior to their resignation
  • As resignation of auditors before fulfilling their responsibilities hampers investor confidence and leaves investors lacking reliable information for taking their financial decisions, SEBI has proposed that if the auditor of a listed entity/material unlisted subsidiary of the listed entity proposes to resign,
    • after signing the audit report for all the quarters (limited review/ audit) of a financial year, except the last quarter, then the auditor shall finalise the audit report for the said financial year before such resignation, and
    • in all other cases, the auditor shall issue limited review/audit report for the quarter in which the auditor resigns from the listed company.
  • With respect to the material unlisted subsidiaries, the auditor shall issue the limited review/audit report for that financial year or quarter, as applicable, before such resignation.
  • Further, if the reason for the auditor's resignation is that the listed entity or a material unlisted subsidiary of a listed company is not providing information, the auditor shall provide an appropriate disclaimer in its audit report, in accordance with Standard of Auditing suggested by the Institute of Chartered Accountants of India.
  • SEBI has suggested relevant amendments to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), to effect the above.
  • Prescribing a format of resignation
  • The resignation letter shall include detailed reasons for resignation and in case of any concerns, efforts made by the auditor prior to resignation. If the resignation is due to information not being made available to the auditor, further details shall be provided including whether the auditor could have performed alternative procedures to obtain appropriate evidence for the purposes of the audit/limited review.

Increased disclosures to investors and strengthening the role of the audit committee

SEBI has, in the Paper, proposed that in case of resignation of the Auditor, the listed entity shall disclose the resignation letter of the auditor to the stock exchanges (in case of material unlisted subsidiary, the subsidiary shall disclose the resignation letter to the listed entity and the listed entity shall disclose the same to the stock exchanges).

Further, SEBI has observed that while the Listing Regulations lay down the broad role of the audit committee, there is no specific procedure to be followed by the auditor or the audit committee, when there are significant concerns leading to the auditor's resignation.

SEBI proposes to issue a circular or amend the Listing Regulations to lay down the procedure in such cases, as follows -

  • Auditors shall approach the chairperson of the audit committee directly and immediately in case of any concerns with the management;
  • In cases where resignation is due to non-receipt of information from the management, the auditor shall inform the audit committee about the details of information/explanation sought;   
  • The audit committee shall thereafter deliberate on the matter and apprise its views to the management and auditor.

The listed entity shall be required to submit the views of the audit committee and its board to the stock exchanges along with the aforementioned resignation letter of the statutory auditor.

SEBI has invited comments on the Paper by 8 August 2019.


The proposed amendments are designed to promote higher accountability of auditors and enhance investor protection. While steps are included to discourage auditors from jumping ship in the middle of their term, safeguards are also put in place by ensuring that the auditors not only list out detailed reasons for such resignation but also list out efforts made by them prior to the resignation.  The Paper also proposes that the statutory auditors confirm in the resignation letter that there are no material reasons for resignation other than those mentioned in the said resignation letter, ensuring that the investors and stakeholders are made aware of all information required to make informed decisions. Clarifying the role of the audit committee is also a step in the right direction in this regard.

The content of this document do not necessarily reflect the views/position of Khaitan & Co but remain solely those of the author(s). For any further queries or follow up please contact Khaitan & Co at

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions