Today’s Economic Times carries an article about SEBI wanting to create a committee to view/ review the qualifications by the auditor.
Let us see what a sister organization MCA (Ministry of Corporate Affairs) is doing. They get the significant Indian companies to file their Annual Returns in XBRL format. In the XBRL format there is a REQUIREMENT which forces companies to:
a) say whether the auditor’s report is qualified or not
b) tag the qualification separately
c) tag the explanation given by the Board of Directors in the Director’s Report,
thus the Registrar of Companies can create a report of all the qualified reports, the qualification, and the director’s explanation of the qualification.
Let us assume you keep a cut off of Rs. 5000 crores Market capitalization, you will have about 200 companies for which this exercise has to be done. Assuming 5% of the reports are qualified, we are talking of 10 companies. If you raise the bar, you will have 20 companies, NOTHING more than that.
Each RoC is perfectly well suited to do the job of the initial scrutiny and ask the management for an explanation.
Sebi can make a simple change in the reporting – and say that the ‘qualification report’ – as tagged in xbrl should be sent by the company to MCA AS WELL AS SEBI.
Do they need a separate cell to do this? hardly. Sebi has enough, and more than enough work on its plate already. Also the Regional Directors and the Registrar of Companies are extremely competent to do this work – scrutiny of filed returns is a full time job for the RoC anyway, why create a new body? – which will have a new form, filing,….etc. etc. beats me.
Here is the news item
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