NFRA to serve notice on Deloitte in IFIN case

NFRA to serve notice on Deloitte in IFIN case

                 

The NFRA (National Financial Regulatory Authority) has initiated disciplinary action against Deloitte Haskins & Sells (DHS) for making lapses in its audits of IL&FS Financial Services (IFIN).

The gaps found in audit report are as follows:

·       - Failure to comply with standards of auditing.

·   - Didn’t question the going concern assumption based on which financial statements were made.

·       - Independence of auditor compromised.

·     -   Non-audit services provided at high fee without approval.

·        -Incorrectly certified accounts showing positive net owned funds and CRAR.

The regulatory body had said in an audit quality review report that quality control systems and processes at DHS were “severely inadequate and ineffective. The first step would be to issue a show cause notice to the audit company, before any action is taken.

NFRA said the auditor did not display the required professional doubts. It accepted the management stand about not disclosing that net owned funds and the capital to risk-assets ratio of IFIN as of March 31,2018 were negative, and that this situation would lead to the cancellation of the company’s license to operate as a non-banking financial company. Instead DHS accepted the explanations of the management and certified these ratios as positive.

NFRA has been given powers to issue orders imposing monetary penalty and debarring an individual member or firm registered with Institute of Chartered Accountants of India (ICAI) for 6 months to 10 years for professional or any other misconduct.

Deloitte India did not wish to comment on the matter.They have said that they performed audits in accordance with applicable laws, regulations and professional standards in India.The authority is also likely to come up with a supplementary report that have not been covered.