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SEBI Consultation Paper: Management Statement and Auditor’s/Independent Practitioner’s Report on Digital Assurance - MMJC
Securities and Exchange Board of India (‘SEBI’) vide its notification dated February 3, 2025, released a consultation paper proposing a ‘Management statement and Auditor’s / Independent Practitioner’s report on digital assurance’ [‘Report on Digital Assurance’].
Why has SEBI floated consultation paper on Report of Digital Assurance?
Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations) governs the submission of financial results by listed companies.
The Auditing and Assurance Standards Board [‘AASB’] and Digital Accounting and Assurance Board [‘DAAB’] of The Institute of Chartered Accountants of India (‘ICAI’) has issued a “Technical Guide on Digital Assurance” to provide guidance to its members on digitally available audit evidence and information [‘Technical Guide’]. Technical Guide does not mandate separate reporting by auditors.
SEBI has now proposed a separate Report on Digital Assurance of financial statement to be prepared by a peer reviewed statutory auditor or independent financial practitioners based on Technical Guide. This is to increase transparency and improve disclosure standards.
Key Aspects of the Proposed Reporting Framework:
- Management Statement: The format for Report on Digital Assurance is outlined in Annexure I of the consultation paper. It is responsibility of the management to create and maintain Report on Digital Assurance. Management must ensure accurate disclosure of financial data sourced from external repositories.
- Auditor’s/Independent Practitioner’s Report: Auditor/Independent Practitioner will be responsible to examine the management statement on digital assurance, underlying audited financial statement, and prepare its Report on Digital Assurance. The auditor will verify that financial data specified in the Report on Digital Assurance aligns with company records and external sources. The report will validate financial computations and ensure compliance with the ICAI Technical Guide on Digital Assurance.
- Applicability:
Mandatory for the top 100 listed entities by market capitalization from FY 2024-25 onwards (applicable from financial periods ending March 31, 2025).
Conclusion:
SEBI’s proposal on bringing in Report on Digital Assurance is step in the right direction. Report on Digital Assurance would help better reconciliation of data by listed companies with regulatory authorities. Companies will need to maintain updated and accurate records, and auditors will play a crucial role in validating financial disclosures using digital evidence. With the Digital India mission the external sources for verifying financial figures will keep on increasing.