NFRA Imposes Rs 2 Crore Penalty on Deloitte Haskins Over ZEEL Audit Issues
The National Financial Reporting Authority (NFRA) has imposed a hefty penalty of Rs 2 crore on Deloitte Haskins & Sells LLP due to professional misconduct linked to the audit of Zee Entertainment Enterprises (ZEEL) for the financial years FY19 and FY20. Additionally, two chartered accountants (CAs) involved in the audit received penalties totaling Rs 15 lakh.
In relation to another case concerning DB Realty, NFRA also levied a penalty of Rs 8 lakh on two CAs, along with a debarment period of five and three years for each, respectively.
Regarding the ZEEL audit, NFRA’s findings indicated that the auditors overlooked significant red flags and failed to consider vital elements such as the promoters’ roles, the foundation for fixed deposit appropriation, and transactions involving ZEEL and its associated companies.
The authority determined that ZEEL had engaged in misappropriation of funds and unauthorized dealings with related parties without the consent of the audit committee, board, or shareholders.
In its ruling, NFRA stated, “There are reasons to believe that the auditors did not exercise due diligence in ensuring the expected audit quality for a public interest entity and displayed gross negligence in their professional responsibilities by not complying with the established statutes.
In response to the ruling, a spokesperson from Deloitte remarked, “We are reviewing the NFRA’s order against our firm and two retired partners to decide on our next steps. Our commitment to maintaining the highest standards of audit quality remains steadfast.
NFRA Finalizes Inspection Reports for BSR & Co. LLP and Lodha & Co.
In its recent inspection report on BSR & Co. LLP, a subsidiary of KPMG, NFRA noted improvements made by the audit firm concerning auditor independence and documentation, among other areas. However, it cautioned that the effectiveness of these measures requires ongoing monitoring due to the limited period available for evaluation.
The report highlighted some deficiencies in verifying related party transactions across several audit engagements.
In its statement, BSR & Co. acknowledged the importance of the inspection process, emphasizing that it allows audit firms to constructively consider regulatory perspectives and enhance their systems and processes.
NFRA recognized that BSR & Co. had taken steps to document its leadership structure and record key decisions made by the audit leadership team, as recommended in last year’s inspection report.
Additionally, the authority’s inspection report for Lodha & Co., which audits more than 60 public interest entities, suggested enhancements in areas such as monitoring independence, audit documentation, and client acceptance and continuance procedures.