SEBI Proposes Mandatory Digital Assurance for Top-100 Listed Firms to Boost Transparency

New Delhi, Feb 3 (PTI) – In a move to enhance financial transparency and investor protection, the Securities and Exchange Board of India (SEBI) has proposed making digital assurance of financial statements mandatory for the top-100 listed companies by market capitalization. This initiative aims to strengthen disclosure standards by allowing auditors to rely on external data sources during audits.

According to SEBI’s consultation paper released on Monday, the introduction of digital assurance reporting will significantly improve the quality of financial disclosures, fostering greater trust in the market ecosystem. SEBI stated that the report should be prepared by an auditor who has undergone the peer review process of the Institute of Chartered Accountants of India (ICAI) and holds a valid certification from the institute.

The proposed digital assurance framework will apply to the top-100 listed entities starting from the financial year 2024-25. SEBI has set a deadline of July 31, 2025, for companies to submit the management statement and auditor’s report on digital assurance to stock exchanges. Non-compliance with the deadline will result in financial penalties.

ICAI’s Technical Guide on Digital Assurance​

Earlier, the ICAI had released a technical guide on digital assurance to help its members integrate technology-driven audit practices. The guide emphasizes the use of digitally available audit evidence and external data sources to enhance audit efficiency. However, it does not impose any obligation on the management of listed companies to provide access to external data for auditors.

Following the release of ICAI’s guide, SEBI engaged with members of the Primary Market Advisory Committee (PMAC) to discuss the need for a separate report on digital assurance for listed firms. Based on these deliberations, SEBI proposed mandating the report as part of its efforts to enhance financial reporting quality.

Public Consultation and Next Steps​

To ensure comprehensive industry feedback, SEBI has invited public comments on the proposal, with a submission deadline of February 24, 2024. The move aligns with SEBI’s broader strategy to fortify financial reporting standards and reinforce investor confidence in the Indian capital markets.

This initiative underscores SEBI’s commitment to leveraging technology to strengthen regulatory oversight and improve corporate governance among India’s leading publicly traded companies.