The National Financial Reporting Authority (NFRA) has fined Deloitte with Rs. 2 Crore for lapses in Zee Entertainment audit for the FY 2018-19 and 2019-20.
Additionally, the watchdog has imposed a monetary penalty of Rs. 10 Lakhs upon CA A.B. Jani and in addition CA A.B. Jani is debarred for 5 years 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.
Further, NFRA has also Imposed a monetary penalty of Rs. 5 Lakhs upon CA Rakesh Sharma and in addition, CA Rakesh Sharma is debarred for 3 years 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.
NFRA while taking the suo-moto cognizance observed that professional misconduct has been proved and considering the nature of violations and principles of proportionality.
The watchdog has observed that the auditors did not exercise due diligence in ensuring the audit quality expected in an audit of a public interest entity and were grossly negligent in the conduct of the professional duties by not adhering to the requirements as laid down by the relevant statutes. The Auditors’ conclusion that they do not have reasons to believe that fraud is committed by the officers of the Company is not supported by sufficient appropriate audit evidence. The Auditors also failed to identify the persons comprising TCWG.
Deloitte Haskins & Sells LLP and CA A.B. Jani committed professional misconduct as defined by Section 132(4) of the Companies Act, 2013, read with Section 22 and Clause 5 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 as amended from time to time, which states that a CA is guilty of professional misconduct when he “fails to disclose a material fact known to him which is not disclosed in a financial statement, but disclosure of which is necessary in making such financial statement where he is concerned with that financial statement in a professional capacity”.
The charge is proved since Deloitte Haskins & Sells LLP and CA A.B. Jani failed to disclose the absence of an actual reason for the closure of the FD and failed to consider in their audit report the impact of the absence of sufficient appropriate audit evidence regarding the FD matter, as detailed in Paragraphs 16 to 63 and 66 to 70 of this Order. The reporting under Section 143(12) was also inadequate due to the omission of this critical fact.
Deloitte Haskins & Sells LLP and CA A.B. Jani and CA Rakesh Sharma committed professional misconduct as defined by Section 132 (4) of the Companies Act, 2013, read with Section 22 and Clause 7 of Part I of the Second Schedule of the Chartered Accountants Act, 1949 (No. 38 of 1949) as amended from time to time, which states that an Auditor is guilty of professional misconduct when he “does not exercise due diligence or is grossly negligent in the conduct of his professional duties”.
This charge is proved as the Auditors conducted the Audit of a Public Interest Entity in disregard of their statutory duties, evidenced by multiple critical omissions, commissions, and violations of the Act and standards, which are subordinate legislation and failure to appropriately report under Section 143(12) of the Act.
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Order Details
Order No. 027/2024
Date: 23/12/2024
