NFRA Issues Notices to IndusInd Bank Auditors Over Suspected Accounting Irregularities
NFRA launches probe into IndusInd Bank’s auditors over suspected accounting irregularities in its derivatives books.
The National Financial Reporting Authority (NFRA) has issued notices to both current and former auditors of IndusInd Bank. This action comes amid ongoing concerns over suspected accounting irregularities in the bank’s handling of foreign exchange derivatives.
According to a report by The Economic Times, the NFRA has requested that auditing firms submit complete audit files, including working papers and documents used to verify the bank’s financial statements. These documents are expected to clarify the scope of the audit, especially whether the auditors were responsible for reviewing the bank's derivatives transactions, which are now at the center of controversy.
The main focus is on the bank’s derivatives book, a complex area involving foreign currency trades. Allegedly, for several years, these transactions were used to either inflate profits or hide losses, depending on market movements. The suspected misstatements may have gone on for over five years and were reportedly carried out by a group of senior officials within the bank.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
NFRA’s examination is likely to reveal whether auditors:
- Were fully aware of these issues, and
- Took the necessary steps to verify the data, or
- Possibly overlooked red flags while certifying the bank’s accounts.
NFRA has reached out to a number of audit firms that have worked with IndusInd Bank since 2017. These include PwC (2015–16 to 2017–18), S.R. Batliboi & Co. (2018–19, part of Ernst & Young), Haribhakti & Co. (2019–20, 2020–21), M P Chitale & Co. (2021–22, and joint auditor in 2023–24), and MSKA & Associates (current auditor, also part of global network BDO)
So far, none of these firms has responded publicly to the notices.
The accounting and audit community is divided over how much responsibility lies with the auditors. Some professionals believe the complexity and volume of trades may have made it difficult to detect issues. Others argue the auditors should have paid more attention to specific areas, such as the bank’s “other assets,” where the disputed transactions were recorded.
Understanding Common Mode of Tax Evasion with Practical Scenarios, Click Here
Interestingly, auditors removed the valuation of derivatives from the list of “key audit matters” in the 2024 annual report, even though it had been highlighted the previous year.
Several experts have pointed out that NFRA should also investigate the bank’s management and its audit committee, not just the auditors. Under NFRA’s own guidelines, audit committees are responsible for reviewing management assumptions, risk estimates, and potential biases. They question whether the auditors were given complete and honest information by the bank’s treasury and finance departments.
Background
The IndusInd Bank audit issue arose from suspected irregularities in its foreign exchange derivatives book between 2017 and 2024. These complex trades allegedly helped the bank hide losses or inflate profits. Multiple auditors, over the years, failed to flag these concerns. As discrepancies came to light, the National Financial Reporting Authority (NFRA) began investigating whether auditors ignored red flags, raising questions about audit quality and possible management misreporting.
Support our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates
