India Audit Regulator Debars 18 CAs For Professional Misconduct

India’s audit regulator recently debarred 18 chartered accountants (CAs) and imposed penalties on them on account of professional misconduct in the audits of various branches of Dewan Housing Finance Corporation Ltd. (DHFL).

The debarment period for CAs ranges from six months to one year and the penalty stands at one lakh rupees each ($1,202), the separate orders passed by the National Financial Reporting Authority (NFRA) showed.

The orders, which were passed on 29 September, will become effective after 30 days from the date of issue of the order.

The affected CAs are S.K. Senapati, Vijay Singh Pamecha, M. Vaman Kamath, Sunil R. Jumani, Shrishail Veeranna Mantgol, Sanjay Soni, Rashmikant D. Kundalia, Ramesh Pipalawa, Ramesh Chaturvedi, P. Rabi Kumar Patra, P. Poovalingam, Nilesh Shah, Mohammad Ayub, Mangesh Vitthal Kekre, Harish Sharma, Dhiraj Parasmal Jain, D.N. Chaturvedi and Aabhas Tiwari.

THE BACKGROUND

The development came after the NFRA investigated the professional conduct of CAs for their role as engagement partners (EP), or branch auditors, in the audit of branches of the crisis-hit housing finance company, which was reportedly involved in the financial fraud, according to the orders.

The NFRA said it suo-motu initiated an audit quality review to probe into the role of the statutory auditors of DHFL for FY18, when the alleged fraud was primarily stated to have occurred.

The move came after media reported on the alleged siphoning of public money of around 31,000 crore rupees and the Enforcement Directorate's reported action in April 2020 on an alleged banking fraud of about 3,700 crore rupees by the promoter/directors of DHFL, it added.

THE FINDINGS

The regulator said during the review, it noticed that 33 EPs had signed the "Independent Branch Auditors' Report" for nearly 250 branches of DHFL for FY18.

The investigations also revealed that the appointment of none of the 33 branch auditors was approved at the annual general meeting of DHFL as required by the Companies Act, and the also failed to comply with the requirements laid down in the Standards on Auditing, it noted.

THE ORDER

Based on the nature of professional misconduct and other factors, the NFRA imposed the penalty on CAs and also debarred them “from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate,” for a period ranging from six months to one year.

Note: $1 = 83.1843 Indian rupees

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