Audit regulator NFRA imposes 1-year ban, slaps fine on auditor for lapses
New Delhi, July 28, 2023
In its order on Thursday, the regulator said it had levied a fine of Rs 1 lakh on Sachin Kansal. He is the proprietor of S Kansal & Associates and statutory auditor of Anshu Clothing for 2015-16
Audit regulator the National Financial Reporting Authority (NFRA) has slapped a fine of Rs 1 lakh and a one-year ban on an auditor for alleged professional misconduct in the audit of Anshu's Clothing Ltd for 2015-16.
During FY2015-16, Anshu's Clothing's, now known as Aditri Gems & Jewels Ltd, shares were listed on BSE and Metropolitan Stock Exchange.
In its order on Thursday, the regulator said it had levied a fine of Rs 1 lakh on Sachin Kansal. He is the proprietor of S Kansal & Associates and statutory auditor of Anshu Clothing for 2015-16.
Besides, Sachin was also prohibited for one year from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate during the debarment period, it added.
The order came after NFRA received information from the Ministry of Corporate Affairs (MCA) regarding irregularities observed in the financial statements of the company by the Financial Reporting Review Board (FRRB) of the ICAI for FY 2015-16.
Thereafter, the regulator initiated an investigation into the role of the statutory auditors during the audit of Anshu Clothing for FY2015-16.
In its probe, NFRA found that Anshu had not recognised accrued interest, amounting to Rs 1.4 crore, on loans from banks and NBFCs in violation of the norms.
With proper accounting of interest accrued, the reported loss of the company would have increased by about 8 times. Such a material and pervasive misstatement in the financial statement of the company was not reported by the auditor in the auditor's report, the regulator said.
Further, deferred tax assets of Rs 9.07 lakh have been recognised by Anshu despite the company being in loss for several years.
Anshu was required to prepare its financial statement in the format as per the Companies Act, 2013, but various instances of non-compliance with the format of financial statements have also been noted, which have not been reported by Sachin Kansal in the auditor's report.
It was also noted that the auditor has not assembled the audit file within 60 days of the signing of the auditor's report and has not appointed Engagement Quality Control Reviewer despite Anshu Clothing being a listed entity.
The auditor did not maintain the agreement on terms of the audit engagement in the audit file, nor did he maintain any written communication with the management in the audit file, the regulator added.
[Press Trust of India]
