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.

The event 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 was not sufficient.

Language matters here. A resignation citing pre-occupation or a group rotation policy is usually what it says. One citing an inability to obtain information, or referring to matters raised with the audit committee, is not.

The base rate is low and the signal is strong. Treat one as a reason to stop and rebuild the accounts from the cash flow statement.