Recently media highlighted news of wherein 30 auditors resigned from Indian companies fearing from regulatory agencies around corporate governance standards. News revealed that 30 firms have resigned as auditors of companies midterm, as compared to about 7 auditor resignation in 2017.
Auditor’s resigning before the term ends is a serious issue and should be done only in the rare and extreme situation as it leads to uncertainty among investors. Stakeholders understand that auditors must be in extreme situation to take such a big step.
Auditors should continue and complete the audit engagement by giving proper Audit conclusion as it will be useful for all the investors. Rather auditor should make complete disclosure of the facts and circumstances leading to resignation.
Auditors role in past should be examined whether he bought issues involving integrity of the management to the attention of the audit committee / members. If they have given a clean report, the company cannot, all of a sudden, come to a situation where the auditors have to take an extreme step.
To protect the interest of all stakeholders, auditor should be required to continue the engagement and give appropriate report. With the rotation of auditors mandatory under Companies Act, auditors should accept new audits after proper due diligence. Failure of which would lead the auditors to quit the audits without even signing audit report with qualifications or taking the matter to the Board of Directors as they are scared of the repurcussions.
If auditors use resignation more regularly in a bid to extricate themselves from high risk audits, it is inevitable that attention will focus on the resignations if subsequent problems at the company are uncovered.
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