Tightening noose around companies trying to hide issues raised by auditors in their voluminous annual reports, market watchdog Sebi today asked all listed firms to submit separate documents for adverse observations made against them.

The regulator has also asked the stock exchanges to conduct immediate scrutiny of the issues highlighted in the documents and seek necessary clarifications from the concerned companies about the observations made by auditors.

If the auditors’ observations are found to be serious, the Sebi can also ask the companies to restate financial accounts and to inform shareholders about it, the regulator said in a circular.

As per the current regulations, all listed companies are required to submit the copies of annual reports containing audited financial statements to the stock exchanges.

However, many serious issues about the companies’ accounts, including possible cases of fraud, can go unnoticed even if they have been flagged off by auditors, as such observations are generally buried deep inside the bulky documents like annual reports.

To enhance the quality of financial reporting by listed companies, Sebi said it has “now decided to put in place a system to monitor the audit qualifications contained in the audit report accompanying the audited annual financial statements submitted by listed companies“.

Accordingly, listed companies will now be required to submit two separate forms along with copies of annual reports submitted to stock exchanges.

Form A will detail the ‘Unqualified/Matter of Emphasis Report’, and the Form B will comprise of ‘Qualified/ Subject To/Except For Audit Report’

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