NFRA slaps a penalty of Rs 2 crore on Deloitte Haskins for ZEEL audit
New Delhi, Dec 24, 2024
NFRA found that ZEEL had misappropriated its money and made unauthorised transactions with related parties without the approval of the audit committee, the board, and shareholders
The National Financial Reporting Authority (NFRA) on Tuesday slapped a penalty of Rs 2 crore on Deloitte Haskins & Sells LLP and total penalty of Rs 15 lakh on two chartered accountants (CAs) for professional misconduct in connection with the audit of Zee Entertainment Enterprises (ZEEL) for the financial years FY19 and FY20.
NFRA also imposed a penalty of Rs 8 lakh on two CAs in relation to the statutory audit of DB Realty and debarred them for five and three years, respectively.
In the matter of ZEEL, NFRA found that the auditors ignored several red flags and did not take into account critical factors such as the role of promoters, the basis for appropriation of fixed deposit and transactions between ZEEL and other group companies.
NFRA found that ZEEL had misappropriated its money and made unauthorised transactions with related parties. This was done without approval of the audit committee, the board and shareholders.
“We have reasons to believe that the auditors did not exercise due diligence in ensuring the audit quality expected in an audit of a public interest entity and were grossly negligent in the conduct of professional duties by not adhering to the requirements as laid down by the relevant statutes,” NFRA said in its order.
Responding to the order, a Deloitte spokesperson said, “We have received the order issued by the NFRA against the firm and two retired partners. We are currently reviewing the order to determine our next course of action. We remain committed to maintaining the highest standards of audit quality.”
Inspection reports for BSR & Co. LLP, Lodha & Co finalised
NFRA, in its second inspection report of the BSR & Co. LLP, a KPMG sub-licensee, found that the audit firm had taken note of its previous suggestions regarding independence of auditor and documentation, among others.
But the measures would require continued monitoring since the period of implementation available for verification was less than a year.
It, however, said that there were deficiencies in the verification of related party transactions in a few audit engagements.
Responding to the report, BSR & Co said, “We acknowledge that the process of inspection is very important and provides an
opportunity for any audit firm to constructively consider the regulatory perspective and bring out qualitative improvements in its existing systems and processes.”
NFRA acknowledged that BSR & Co had implemented steps such as documenting its leadership structure and minutes of the key decisions of the audit leadership team, as pointed out in its first inspection report last year.
The authority, in its inspection report for Lodha & Co, which handles audits of more than 60 public interest entities, has suggested improvements in the firm’s independence monitoring, audit documentation, client acceptance and continuance, among others.
[The Business Standard]
