Going beyond traditional reporting of the auditors of listed companies
View(s):Influential people of the government and the chairman of the SEC (Securities & Exchange Commission) have proposed to enlarge the reporting responsibilities of the listed company auditors.
They propose that auditors of listed companies should submit a report to SEC to disclose malpractices, fraudulent activities and material violation of regulations, etc in the listed companies. This is an additional report to the traditional audit report to shareholders. Some activities to pass these laws have already been processed but they were not passed in parliament due to current political status.
The rapid development of the Colombo stock market including a Rs. 3 trillion market capitalisation and massive number of investors triggered the need for such laws. Recently some of the listed companies have gone bankrupt while numbers of quoted companies are operated with negative net worth.
Traditional audit reports reveal only limited information and we have rarely see a modified opinion from the auditor. Therefore various groups are discussing the responsibility of the auditor under this scenario.
Auditors are paid by shareholders funds and shareholders should receive proper services from the auditor.
However this responsibility should be confined to the verifiable aspects by an auditor. These regulations should not create undue pressure or embarrassment for the auditor.
Some of these regulations exist in many counties. This will increase the practical value addition of the auditor to protect good governance of publicly owned listed companies.
Any strong refusal of these responsibilities by chartered accountants could have repercussions. CA Sri Lanka has a responsibility to manage the scenario to the positive side of their members.
At present an investor with a portfolio of below Rs. 20 million is treated as a minority investor. I have written this as a minority investor of the stock market since 1999.
Dulika Vidanage (ACA)