RBI slaps penalty of 90.00 lakh on Vasai Vikas Sahakari Bank (See 'Corp Brief') Kimberly Watson joins Wipro as country head and MD for Canada Swiss Re to acquire 23% stake in Paytm’s general insurance segment for Rs 920 crore Affine to expands presence in Hyderabad & expects to reach a headcount of 1,000 people by end of next year MSME Minister launches SAMBHAV to promote entrepreneurship (See 'Corp Brief') IBC - Once claim is backed by award passed by the MSME Facilitation Council and there is no stay against same, Resolution Professional can not reject claim of applicant on ground that there is no due shown in the books of the corporate debtor against the applicant : NCLT (See 'Legal Desk') SEBI - Failure to appear before Investigating Authority and furnish information violates section 11C(3) : SEBI (See 'Legal Desk') Anurag Mittal, joins UTI Asset Management Company IEX to commence trade in Energy Saving Certificates India Post Payments Bank ties up with HDFC to offer home loans Incubation Centre for Innovation and Entrepreneurship at AIIA (See 'Corp Brief') RBI launches Consumer Confidence Survey (See 'Corp Brief') Phoenix Parentco acquires Parexel International; CCI okays (See 'Corp Brief') The Indian Contract Act - Injunction order restraining alienation of properties can be passed as it causes no inconvenience to defendant whereas equities require that interests of plaintiff be secured : HC (See 'Legal Desk') IBC - Petition filed u/s 7 of code can be admitted when corporate debtor fails to show any valid proof that debt due and payable to petitioner in his individual capacity is paid to him in his individual capacity : NCLT (See 'Legal Desk')

NFRA report finds fault with appointment of auditor for IL&FS

Published: Sep 24, 2021

By TIOLCorplaws News Service

NEW DELHI, SEPT 24, 2021: THE National Financial Reporting Authority (NFRA) has issued Audit Quality Review (AQR) report of the statutory audit of IL&FS Transportation Networks Limited (ITNL) for the Financial Year 2017-18.

The statutory auditor for this engagement was SRBC & Co LLP, Chartered Accountants.

The AQR has been conducted pursuant to Section 132(2)(b) of the Companies Act, 2013 and NFRA Rules, 2018 which require the NFRA to, inter alia, monitor and enforce the compliance with accounting standards and auditing standards India.

Some of the significant conclusions of NFRA in the report are as follows:

The initial appointment of SRBC & Co LLP, and the continuation of SRBC & Co LLP, as statutory auditor of ITNL, was prima facie illegal and void.

The Audit Firm has failed to appropriately and sufficiently evaluate the use of the going concern basis of accounting by the Management and has thus failed to note the implications thereof in the Auditor's Report.

ITNL's financial exposure to its subsidiaries, associates and joint ventures amounting to Rs. 3,346 crore was not properly valued as per the applicable Accounting Standards.

The Company's losses during 2017-18 were understated by at least Rs. 2021 crore on account of unjustified reversal of Expected Credit Loss (ECL) on loans given to the SPV and on trade receivables, and due to incorrect impairment valuation. This is excluding the impact due to incorrect treatment of the letter of comforts amounting to Rs 2654 crore, which should have been correctly treated as financial guarantees as per the accounting standards, the effect of which on profit/loss is not quantified.

The Audit Firm's EQC partner has failed to report material misstatements known to him to appear in a financial statement with which he is concerned in his professional capacity and has not exercised due diligence to obtain sufficient information to objectively evaluate the significant judgements of the Engagement Team and conclusions reached by them.

The Audit Firm has failed to maintain documents as per SA 230. The integrity of the Audit File is questionable due to tampering and inconsistency pointed out at several places in the AQRR.

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