The market watchdog SEBI has proposed stringent rules in relation to laws governing auditors and other individuals appointed to oversee auditing functions at various listed entities.
The Kotak committee convened to improve the Corporate governance sphere in 2017 said that SEBI be empowered to act against auditors and other third-party individuals or firms with statutory duties under the securities law.
The gaps in auditing at several of the firms has resulted in various frauds going unnoticed for years and during the scenario SEBI had not control over the auditing entities.
The market regulator has proposed that the company's board of directors take the front seat and investigates against the firm or individual in case they happen to violate any of the regulations or submit a false report or certificate.
The proposal is being made after $2 billion loan fraud at the state-run PNB was left unnoticed for several years.
There exist no direct regulators to oversee the functioning of different professionals including CAs, CS, monitoring agencies and valuers. Nonetheless, other institutions such as credit rating agencies, merchant bankers, custodians etc. are regulated as well as register under the SEBI's framework.
Through the new listed amendments, auditors would need to ensure that certificate and reports issued by them are true and they need to exercise all care and due diligence.
Furthermore, for the draft new regulations, SEBI has sought feedback and comments over the next month.