Singh & Associates LLP, a firm of practicing chartered accountants, being statutory auditors of Decent Industries Ltd., a listed entity since last 4 years. The auditors have proposed for hefty increase in their audit

CS Professional · Governance, Risk Management, Compliances and Ethics · PYQS · December 2022
Singh & Associates LLP, a firm of practicing chartered accountants, being statutory auditors of Decent Industries Ltd., a listed entity since last 4 years. The auditors have proposed for hefty increase in their audit fees which the company is not in a position to accept. They expressed their inability to continue as statutory auditors and submitted their resignation to the company addressed to the BOD on 6 th August, 2021. The next board meeting of the company was scheduled to be held on 9 th August, 2021 to consider its quarterly results. The company secretary of the company informed the stock exchanges about said resignation without bringing to the knowledge of the audit committee as well as the Board. The chairman of the audit committee took a strong objection and pointed out a serious lapse on the part of the company. He suggested the ways to avoid such a lapse without any non-compliance. The company secretary placed the proposal before the Audit Committee & Board of Directors for appointment of New Auditors in casual vacancy arisen due to resignation of current Auditors (Outgoing). Whether the authority, powers and structure of Audit Committee and the Board are undermined ?

Answer & Explanation:

The Company Secretary being the Compliance Officer of the Company was duty bound to intimate the Stock Exchange about the resignation of Statutory Auditors as soon as possible and not later than 24 hours of receipt of such reasons from the auditor. There is no requirement under the SEBI (LODR) Regulations, 2015 to first intimate the same to Board or the Audit Committee. There appears an apparent undermining of authority, power or structure of the Audit Committee and the Board in the given situation. Company Secretary could have also simultaneously intimated this resignation to the Chairman of the Audit Committee and the Board by way of an email. Bypassing and adopting of a shortcut approach are of grave concern from compliance point of view. Company Secretary realised his mistake and assured the Audit Committee and the Board that he will take care in future.

Topics: Corporate Governance

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