NEW DELHI: The National Financial Reporting Authority (NFRA), which comes under the Ministry of Corporate Affairs, has found multiple failures in the statutory audit of IL&FS Financial Services Limited (IFIN) for 2017-18.
In a Audit Quality Review report released on Monday, NFRA said that the auditor — BSR and Associates, part of KPMG India — has not only failed to comply with the standard audit practices but also made false declarations.
“The non-audit services provided technically by the KPMG labelled entities of the network are clearly services indirectly provided by BSR entities, and result in gross violations of the independence requirements for auditors laid down under the Companies Act, as well as the Code of Ethics mandated by the Institute of Chartered Accountants of India, it said, adding that BSR did not have “adequate justification” for issuing an audit report of IFIN. The appointment of BSR as statutory auditors was “ab initio illegal and void”,it said in a 256-page report.
Further, NFRA found that the IT processes/ platform used by BSR have deficiencies that are systemic and
structural in nature, a release issued by the corporate affairs ministry said. NFRA would also examine whether disciplinary proceedings need to be initiated in connection with the AQRR.
NFRA investigations are crucial as the regulatory body has power to ban an audit firm for up to 10 years.
BSR, however, said the audit quality review did not give “due consideration to all the facts and circumstances”, adding that it was reviewing the report. “We are concerned to note the conclusions by NFRA in the Audit Quality Review as they do not give due consideration to all the facts and circumstances that were transparently shared by us with NFRA during their review. We are reviewing the report in detail and will determine our response in due course. Audit quality remains the cornerstone of our profession” a BSR spokesperson said.