Nepal Securities Board Decides to Deny IPO Approval to Companies Receiving Adverse or Disclaimer Audit Opinions
The Nepal Securities Board has issued regulation 2082 stating that companies receiving adverse or disclaimer opinions from auditors will not be granted permission to conduct Initial Public Offerings (IPOs). The regulation requires appointing audit experts to review financial statements along with due diligence certificates, subject to the Board’s approval. These audit experts must submit their reports within 30 days to the Board, with necessary cooperation provided by the issue manager and the company, as specified in the standards.
Kathmandu, Chaitra 25.
The Board has ruled that companies whose financial statements receive adverse or disclaimer opinions from auditors will be disqualified from issuing ordinary shares through IPOs. This is part of the standards for financial statement reviews submitted for IPOs issued in 2082. According to these standards, if the latest audited financial report of an organized institution applying for an IPO contains an adverse opinion or disclaimer by the auditor, the IPO application is considered ineligible.
Furthermore, the Board has emphasized increased responsibility for issue managers in reviewing and scrutinizing financial statements. When submitting an application for a public issuance to the Board, the issue manager must provide a due diligence certificate, verifying a detailed examination of the company’s financial condition based on prescribed criteria, and submit this certified information to the Board.
When it is determined that financial statements require review or due diligence along with the due diligence certificate from the issue manager, the Board’s approval must be obtained to appoint an audit expert listed with the Nepal Chartered Accountant Institute. The issue manager is required to recommend three audit experts’ names and submit an application to the Board. The Board, according to qualifications, scope of work, and terms of service, will then appoint one of the recommended experts as stipulated in the standards.
The appointed audit expert must personally submit the review or due diligence report to the Board within 30 days from the approval date, as per the regulation. If unable to meet the deadline, the expert must notify the Board in advance, and an extension of up to 10 additional days may be granted for report submission. Expenses related to the audit expert’s fees and other costs are to be borne by the concerned organization. The standards also mandate that the issue manager and the organized institution provide necessary assistance, including documentation, data, and on-site inspections, to the audit expert during the financial statement review or due diligence process.
