This was misleading news. after that SEBI Commitee, SCODA has rejected the proposal.
LISTED FIRMS CFO NEED NOT BE A CA: SEBI Commitee
MUMBAI: In a bid to improve disclosure and accounting norms for listed companies, a committee of the Securities & Exchange Board of India made a few proposals.
The market regulator’s committee, in a discussion paper on Monday, recommended changes in the way companies disclose earnings and sought placing greater responsibilities on internal audit committees and firms to ensure compliance with accounting norms.
The implementation of these proposals would require companies to make more efforts to stay listed on the stock exchanges, auditors and lawyers said.
The Sebi committee indicated that the chief financial officer of a listed entity need not be a chartered accountant, but proposed that the appointment should be approved by its audit committee. It said the audit committee, which comprises two thirds of an entity’s independent directors, will be responsible to ensure the top finance officer’s professional credentials.
RS Loona, managing partner of Alliance Corporate Lawyers and former executive director (law) at Sebi, feels the appointment of a chief finance officer should be done by a company’s board, rather than the audit committee.
“The role of the audit committee should be only to the extent of expressing its opinion about the appointment,” Loona said.
The Committee, however, recommended the Sebi’s proposal to make it mandatory that an external audit firm would carry out the internal auditor’s role, “would not be prudent”.
Further, the Sebi committee proposed making disclosure of audited figures on the balance sheet every six months. Currently, companies disclose their statements of assets and liabilities at the end of every financial year. The step will enable investors gain a better perspective about a company’s asset-liability position more frequently.
The committee has recommended to streamline the submission of financial results by companies and reduce the period for their submission to the stock exchanges.
“There is still a need to try and standardise the extent and quality of reporting by various companies; some report audited, some reviewed and some unaudited and unreviewed results which may either be standalone or consolidated,” said V Venkataramanan, Director, accounting advisory services, KPMG. “Introducing a more consistent and comparable format for quarterly reporting should be the medium term aim for listed companies in India,” he said.
While proposing that the audit committee should be responsible for the independence of the audit firm and its partners, the committee also proposed rotating an audit firm’s partner, who signs the audited statements, every five years.
“The objective behind the above recommendation seeks to ensure that the statutory auditors are independent from management. It would also break any continued long-term association of an audit partner with the management of a particular listed entity,” the discussion paper said.
The committee has recommended relieving the auditors of the responsibility of verifying the details regarding disclosure of pledged shares of the company promoters.
Finally, the Sebi committee proposed that companies should be allowed to voluntarily adopt International Financial Reporting Standards as a possible first step towards phased implementation of the new accounting practice starting April, 2011.
“Voluntary adoption of IFRS will allow large companies to be truly comparable with their global peers. The current proposals should be supplemented with a clear road map for when mandatory IFRS adoption will be required for listed companies in India,” Venkataramanan said.