Govt. May Ban Deloitte for Alleged Malpractice and Ill Conduct in IL&FS AccountsApril 29, 2019 12:30
(Image source from: Financial Times)
The Ministry of Corporate Affairs may debar United States-headquartered management consultancy firm Deloitte for its alleged malpractice and ill conduct in Infrastructure Leasing & Financial Services (IL&FS) audit process under section 140 (5) of the Companies Act, according to a report.
The section says: Without prejudice to any action under the provisions of this Act or any other law for the time being in force, the Tribunal either suo moto or on an application made to it by the Central government or by any person concerned, if it is satisfied that the auditor of a company has, whether directly or indirectly, acted in a fraudulent manner or abetted or colluded in any fraud by, or in relation to, the company or its directors or officers, it may, by order, direct the company to change its auditors.
A Deloitte spokesperson told IANS, "Investigations on IL&FS Financial Service (IFIN) are in progress and we are cooperating fully. We reaffirm that we have conducted our audits in accordance with the auditing standards and applicable laws and regulations."
Deloitte had maintained that the IL&FS default started in May last year. IL&FS and IL&FS Transportation Networks (ITNL), two of the main arms of the IL&FS Group, were audited by SRBC & Co (E&Y) in 2017-18 and 2018-19. Another arm, IFIN, was audited by BSR (KPMG) in 2018-19.
Deloitte said many smaller firms had performed audits on a majority of the 347 subsidiaries of IL&FS. It was found that when Deloitte was auditing the group for many years, loans were collaterized sufficiently, and these were valued independently by organizations like Knight Frank.
These assets and their value were verified by the fact that Piramal Group had expressed an intention of buying a stake in IL&FS at Rs 750 a share after due diligence performed by KPMG in 2015-16.
The report quoted Deloitte as saying they did not perform audits for 111 subsidiaries, 36 jointly controlled entities, 11 associates in 2016-17, or the financial information of 13 subsidiaries, two jointly controlled entities or six associates.
If the government carries through with it, this will be the second such instance after Price Waterhouse (PW) was debarred in the Satyam Computer Services scam
By Sowmya Sangam