Sources have told Moneycontrol that the Securities and Exchange Board of India (SEBI) may look into role of Deloitte, and affiliates of KPMG and EY for their role as auditors of the beleaguered IL&FS Group at some point or in some role over the past few years.
Tarun Sharma
@talktotarun
A decade since the Satyam scam unfolded, a development that resulted in serious consequences for its auditor PricewaterhouseCoopers (PwC), the remaining three of the famous Big 4 accounting firms quartet could find themselves in trouble, this time for the IL&FS crisis.
Sources have told Moneycontrol that the Securities and Exchange Board of India (SEBI) may look into role of Deloitte, and affiliates of KPMG and EY for their role as auditors of the beleaguered IL&FS Group at some point or in some role over the past few years.
SEBI’s action follows a report by the Institute of Chartered Accounts of India (ICAI), which indicted Deloitte, EY affiliate SRBC & Co, and KPMG affiliate BSR and Associates for “failing in their duty” and “misrepresenting facts”. Moneycontrol has seen a copy of the report.Deloitte, SRBC and BSR & Associates respectively were the statutory auditors of the group. Deloitte was the statutory auditor of IL&FS during FY2017 and prior, and of IL&FS financial services (IFIN) during FY 2016-2017 and FY 2017-2018, as well as of IL&FS transport networks (ITNL) during FY 2016-2017 and FY 2017-2018.
SRBC was the statutory auditor of IL&FS during FY 2017-2018, of ITNL from FY 2016-2017, and FY 2017-2018. BSR & Associates was the statutory auditor for IFIN from FY 2016-2017 and FY 2017-2018, and ITNL from FY 2016-2017 and FY 2017-2018.
Deloitte, KPMG and EY are all on SEBI’s empaneled list of forensic auditors.
Separately, Moneycontrol has learned that the Ministry of Corporate Affairs (MCA) may also initiate action against these firms with help of to-be-launched audit regulator National Financial Reporting Authority (NFRA). “The IL&FS crisis raises questions over whether these firms can audit other listed companies,” a source close to the government said.
The development comes after PW approached the Supreme Court challenging the ruling of the Securities Appellate Tribunal (SAT), which had upheld SEBI’s order disallowing the firm from auditing listed companies for two years.
SEBI Chairman Ajay Tyagi has maintained that SEBI, being the regulator of listed entities, can take action against errant auditors irrespective of any action by NFRA.
Anil Choudhary, Partner Finsec law told Moneycontrol "Sebi has taken action in past also in such cases. Usually regulator barred for some time to audit listed companies audit and strignent action increase investor confidence".
However, Amit Tandon, Co-founder of IIAS, told Moneycontrol, that SEBI should independently verify any wrongdoing before taking any action. “SEBI should not go by only ICAI’s findings,” he said.
In the IL&FS case, SEBI has already started adjudication against three credit rating agencies, which gave the companies strong ratings despite their poor health.
