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SEBI will set up an in-house cell to study the financial reports of listed companies.
However, this would be a long-term goal and not something that would be done immediately, Ms Usha Narayanan, SEBI Executive Director, has said.
She noted that financial reporting was important and any misleading reporting had its own impact on markets. Currently, there is no mechanism within SEBI to directly review the financial reporting of listed companies.
Under the current system, the Financial Reporting Review Board (FRRB) of the Institute of Chartered Accountants of India (ICAI) looks at audit reports, but on a random basis. Wherever there is a deviation, the FRRB sends its comments to the Securities and Exchange Board of India (SEBI).
On its part, SEBI has already taken certain steps like asking stock exchanges to do first review whenever qualified audit reports are filed with them.
Stock exchanges have been asked to take it up with the company concerned as to why such audit qualifications persist and if necessary write to the CA Institute. In worst cases, a company may even be asked to recast their financial report.
All this is being done only in cases of qualified audit reports submitted with stock exchanges.
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