NFRA begins probe into Rajesh Exports revenue misstatement case
Mumbai, Jul 7, 2026
Synopsis
The National Financial Reporting Authority is investigating Rajesh Exports for revenue misstatements. NFRA chairperson Nitin Gupta stressed the need for genuine board independence. He highlighted that human judgment remains essential in financial reporting decisions. AI's influence necessitates critical questioning of its outputs by boards. Effective governance relies on the spirit of implementation, not just regulations.
The National Financial Reporting Authority (NFRA) is looking into the revenue misstatements case at Rajesh Exports, but it will not be possible to share a timeline on the probe, a top official at the auditors' watchdog said on Tuesday.
"Yes, we have started our processes," NFRA chairperson Nitin Gupta said on the sidelines of an event organised by Ficci here.
He declined to share any observations, saying the matter is not with him, and also a timeline by which the probe will be completed.
It can be noted that last month, capital markets regulator Sebi issued an order in which Rajesh Exports was found to have indulged in misstating revenues over a long period, pegging the overall discrepancies at Rs 15.5 lakh crore.
As per subsequent reports, Sebi had written to NFRA seeking examination of the errant entity's auditors.
Gupta on Tuesday called for genuine board independence in India's promoter-driven companies, pointing out that as AI influences corporate decision-making, a critical look at an issue may be essential.
Highlighting the role of AI in finance and auditing, Gupta said every material judgment in financial reporting must continue to remain with humans.
Gupta said formal independence alone is not sufficient if board members are unwilling or unable to question management decisions." In India, because we are promoter-driven, the dominant ownership structure is the ownership of the management, the formal structure of independence can exist in full, and yet substantive challenge can quietly fail to occur because social norms, information dependence and the practical realities of board composition may work against it," he said.
"What we have to look for is the real independence, and the real independence is not on paper, but it is in practice. It has to be animated by genuine willingness and genuine permission of the institution to challenge."
Gupta said AI has made the need for such a culture even more urgent as these systems are capable of producing confident, fluent and plausible outputs that could be mistaken for correct conclusions.
"That fluency can be mistaken for correctness," he said, adding that boards and auditors must consciously cultivate the discipline of questioning AI-generated outputs rather than accepting them because they appear authoritative.
He added that governance effectiveness depends more on the spirit of implementation than on the existence of regulations.
"It is not the regulation that determines whether governance is effective, but it is the manner, the rigour, and above all the spirit with which the regulation is implemented," Gupta said.
On the importance of humans taking the final call, he said a chief financial officer may use AI tools to accelerate financial consolidation, but every material judgment embedded in the numbers, every estimate, every assumption is owned, understood and is defensible by a human being in that finance function and not merely the model which is produced.
Gupta also urged boards and audit committees to ask critical questions before approving AI deployment, including what data is being used, who owns the model, how it is validated, whether there are biases, whether adequate human oversight exists and whether audit trails and cybersecurity controls are in place.
[The Economic Times]
