In a scam relating to Dewan Housing Finance Limited Corporation (DHFL), the National Financial Reporting Authority (NFRA) has imposed a penalty of ₹300,000 on the statutory auditor of now de-listed company SRS Ltd for alleged professional misconduct and lapses in the FY18 audit of the company, showed an official order.
The Chartered Accountants CA Ayna Tamton, CAM Baskaran, CA Akash Goel, CA Harish Kumar T K, CA Sam Varghese and CA Mathew Samuel were debarred for one year from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.
DHFL is a housing finance company listed on both NSE and BSE), operating through a network of branches, was reportedly involved in financial fraud. NFRA took suo motu notice of the matter and carried out an Audit Quality Review (AQR) of the statutory audit of DHFL for FY 2017-18, conducted by Chaturvedi & Shah (CAS), a Mumbai-based Chartered Accountant Firm.
During the review, it was also noticed that 33 Engagement Partners (EP) or branch auditors had signed the “Independent Brach Auditor’s Report” for nearly 250 branches. NFRA’s investigations undertaken under section 132 (4) of the Companies Act, 2013 revealed none of the 33 branch auditors was approved by the AGM, as required by the Companies Act, 2013. The audit firms accepted the appointment, portrayed themselves as “branch statutory auditor” in all communications with the Company and CAS, and issued an “independent branch auditor’s report”. By doing so, these penalized Chartered Accountants also violated the provisions of the Chartered Accounts Act 1949, which require ensuring a valid appointment as per the Act.
NFRA Members Dr Praveen Kumar Tiwari and Ms. Smita Jhingran found that “The EP in the present case was required to ensure compliance with SAs to achieve the necessary audit quality and lend credibility to the reports issued to facilitate the Company’s Auditor to form their opinion on the Financial Statements. As detailed in this order starting from the acceptance of the Audit to the conduct and conclusion of the audit, there were substantial deficiencies in the Audit and abdication of responsibility on the part of EP, which establishes the professional misconduct. Despite being a qualified professional, we find that the EP, the Chartered Accountants have not adhered to the Standards of Audit. On the contrary, the EP has tried to cover up the deficiencies by resorting to arguments not supported by law or evidence”
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