The auditor-regulator, the National Financial Reporting Authority (NFRA) has imposed a penalty of Three lakhs on the statutory auditor of now-de-listed company SRS Ltd, along with a three-year ban on taking up statutory or internal audits of any company, for alleged professional misconduct and lapses in the FY18 audit of the company.
In the year 2018, the company declared as bankrupt and the NFRA initiated its investigation after receiving a reference from the Serious Fraud Investigation Office (SFIO). The audit engagement partner allegedly ignored indicators pointing to an abnormal state of affairs in the company, and failed to display professional skepticism and due diligence in reaching his audit opinion.
The NFRA has imposed a fine and a three-year ban on both auditors namely, CA Pankaj Kumar and CA Naresh Kumar for professional misconduct and other lapses in connection with the audit of SRS Ltd in 2017-18.
The order came after the NFRA received a letter from the SFIO, which had investigated the affairs of SRS Ltd and the group companies. SFIO, after its investigation, revealed that the company and its group companies had presented financial statements containing false statements of debtors and indulged in the malpractice of round-tripping and layering of transactions resulting in inflated purchases and sales. The NFRA further initiated action under the Companies Act for investigating professional or other misconduct of the statutory auditors of SRS Ltd.
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