Auditor resignation

An auditor leaving before the end of their term. Indian listed companies must disclose it to the exchanges along with the reasons given, and the reasons are worth reading in the auditor's own words rather than in the company's summary.

An auditor's exit carries information because of what precedes it. An auditor who cannot get satisfactory evidence, or who disagrees with management on a material treatment, has three options: qualify the opinion, resign, or acquiesce. A resignation says the disagreement was serious enough that the first option wasn't sufficient.

Language matters here. A change at the end of a term under a group rotation policy is usually what it says. A mid-term resignation citing pre-occupation or another generic reason is itself the warning, and one citing an inability to obtain information, or referring to matters raised with the audit committee, is a stronger one.

Its base rate is low and its signal is strong. If you see one, stop and rebuild the accounts from the cash flow statement.