The National Financial Reporting Authority (NFRA) has barred auditors of M/s Brightcom Group for up to ten years and imposed heavy monetary penalties on them, citing professional misconduct in auditing the company between FY20 and FY22.While the audit firm, M/s PCN & Associates, has been prohibited from taking up any audit work for two years, chartered accountant Gopala Krishna Kandula has been barred for ten years, according to a NFRA order on Friday.
In addition, the regulator has imposed a penalty of Rs 50 lakh on the audit firm and another Rs 30 lakh on Kandula.
NFRA flagged that the audit firm and the engagement partner (auditor) didn’t co-operate with it in its investigation, despite repeated calls for the submission of relevant documents and information and opportunities for personal hearing. Kandula, it said, submitted a false affidavit to avoid submitting information and attending personal hearings.
This order concludes that the failure of the audit firm and the EP (engagement partner, Kandula in this case) to cooperate with NFRA is a professional misconduct under section 132 (4) of the Companies Act, 2013, that is, failure to supply the information called for, failure to comply with the requirements asked for, failure to exercise due diligence and being grossly negligent in the conduct of professional duties,” the order said.
CMIL auditors face ban, penalty
In a separate order, NFRA has imposed a penalty of Rs 50 lakh on audit firm M/s Krishna Neeraj & Associates and another Rs 10 lakh on its partner citing professional misconduct in the audit of electrical company CMIL.
The regulator also barred the partner, Krishna Neeraj, from taking up any audit work for two years.“The auditors failed to demonstrate sufficiency and appropriateness of audit work in several critical aspects of the audit of the Financial Statements, that is, determining materiality, evaluation of the going concern assumption, verification of inventories and trade receivables, verification of reported revenue and evaluating the audit results,” the NFRA said in the order.
The auditors failed to report the non-recognition of liabilities of the interest accrued on loans classified as non-performing assets, which resulted in the understatement of the interest cost, current liabilities, and the reported loss by the company.
The audit regulator said the auditors failed to analyse the going concern assumption despite the fact that CMIL had witnessed continuous drop in revenue to just Rs 201.70 crore in FY21 from Rs 637.30 crore in FY19. Similarly, its profit after tax declined from Rs 45.08 crore in FY19 to a loss of Rs 194.60 crore in FY21.
In both the above cases, the audit regulator started investigations after capital markets watchdog Sebi informed it of suspected irregularities at these firms, according to the orders.
NFRA has been cracking down on errant auditors in recent years, having already debarred and penalised several of them in connection with IL&FS and DHFL and other scams.
No comments:
Post a Comment