A Securities and Exchange Board of India (Sebi) panel on corporate governance is considering whether an auditor should be barred from scrutinizing the books of listed companies if an audit is ineffective and fails to spot financial discrepancies.
It’s the first time the regulator is considering an active monitoring of the role of auditors, currently governed by the Institute of Chartered Accountants of India (ICAI). The debate on the role and responsibility of auditors started again after some listed banks reported bad loans that diverged widely from the assessment of the Reserve Bank of India (RBI).
Sebi sought clarifications from the lenders on bad loan divergences and also sought information from their auditors.
“Of course we sought information from auditors. In fact, this is one of the areas that Sebi’s governance panel is examining—that is, how Sebi can step in to monitor the role of auditors. We can bar them from an audit of the listed companies, if the audit is found to be ineffective, or also from auditing any Sebi-regulated entities,” said S. Raman, whole-time member, Sebi, in an interview.
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