Securities and Exchange Board of India (SEBI), vide Circular No. CIR/CFD/CMD/56/2016 dated 27/05/2016, has put in place a mechanism to review the audit qualifications contained in the audit reports of the listed entities, in continuation of its Notification No. SEBI/ LAD-NRO/GN/2016-17/001, dated 25/05/2016;
- To make the listed entities disseminate the cumulative impact of all the audit qualifications in a separate format, simultaneously, while submitting the annual audited financial results to the stock exchanges. This will ensure that the information is available to the investors, without delay, enabling them to take well informed investment decisions;
- to dispense with the existing requirement of filing Form A or Form B for audit report with unmodified or modified opinion respectively;
- to dispense with the existing requirement of making adjustment in the books of accounts of the subsequent year.
The operational details for implementing the aforesaid amendments shall be as under:
- For audit reports with unmodified opinion, the listed entity shall furnish a declaration to that effect to the stock exchange(s) while submitting the annual audited financial results.
- For audit reports with modified opinion, a statement showing impact of audit qualifications shall be filed with the stock exchanges in a format as specified in Annexure I.
- The management of the listed entity shall have the option to explain its views on the audit qualifications;
- Where the impact of the audit qualification is not quantified by the auditor, the management shall make an estimate. In case the management is unable to make an estimate, it shall provide reasons for the same. In both the scenarios, the auditor shall review and give the comments.
- The aforesaid statements on impact of audit qualifications filed by the listed entities shall be a part of regular monitoring by the stock exchanges as specified in Regulation 97 of the Listing Regulations. In case of noncompliance, the stock exchanges shall take action against such entities as deemed fit and report to SEBI on a regular basis. The stock exchanges shall coordinate with one another in case the scrip is listed on more than one stock exchange.
The said circular is applicable on all the annual audited standalone / consolidated financial results, as applicable, submitted by the listed entities for the period ending on or after March 31, 2016.
The said Circular available at the following link:SEBI Circular No. CIR-CFD-CMD-56-2016-27.05.16_Disc. on the impact of Audit quali