Assurance players seek Sebi clarity on ‘overly restrictive’ ESG assurance rule

economictimes.indiatimes.com:

ESG refers to environment, social and governance. The firms provide a variety of permissible and non-conflicting non-audit services like tax, compliances and other advisory services to major companies. The Sebi notification on July 12 said, “The listed entity shall ensure that there is no conflict of interest with the assurance provider appointed for assuring the BRSR Core.

For instance, it shall be ensured that the assurance provider or any of its associates do not sell its products or provide any non-audit/non-assurance related service, including consulting services, to the listed entity or its group entities”. The assurance players say the Sebi regulation is overly strict and it prohibits Business Responsibility and Sustainability Report (BRSR) Core assurance providers from offering permitted services under Section 144 of the Companies Act, 2013. Section 144 encompasses what non-audit services, e.g., accounting or investment banking services or management services, an auditor or audit firm is not allowed to provide, either directly or indirectly, to the company or its holding company or subsidiary company.

A permissible service can be provided with an approval by the audit committee/board of the company. “So, as a statutory auditor of a company, the firm may offer non-audit services without conflicts. However, as per the Sebi regulation, an auditor cannot provide even a non-conflicting and permissible non-audit service, allowed under Section 144, to the same client if conducting an ESG assurance.