Auditor of Coffee Day Group entity debarred for 10 years
1 min read . Updated: 27 Apr 2023, 12:42 AM IST
PremiumThe audit regulator said its investigations showed that the auditor failed to meet the relevant requirements of auditing standards in a number of significant aspects and demonstrated a serious lack of competence.
New Delhi: The National Financial Reporting Authority (NFRA) has debarred a Karnataka-based auditor for 10 years, citing deficiencies in the FY20 statutory audit of Mysore Amalgamated Coffee Estates Ltd, a group entity of Coffee Day Enterprises Ltd, showed an official order.
This is the third order from the audit watchdog this month alleging deficiencies in the audit of some of the group entities, based on an investigation prompted by a reference from the capital market watchdog Securities and Exchange Board of India (Sebi).
In the latest instance, Lavitha Shetty, proprietor of Lavitha & Associates, an ICAI-registered firm based in Chikkamagaluru, has been imposed a penalty of ₹10 lakh, showed the order. A person informed about the development said the 10-year debarment is the maximum penalty in such cases.
Emails sent to the auditor and to the Coffee Day Enterprises Ltd on Wednesday seeking comments for the story remained unanswered till press time. With the debarment, the auditor cannot be appointed as an auditor or as an internal auditor of any company or body corporate. The first five years of the 10 years debarment ordered will run concurrently with the period of five years debarment imposed on the auditor for alleged professional misconduct in the audit of the same company for the year FY19, which was issued earlier this month, the NFRA order said.
The audit regulator said its investigations showed that the auditor failed to meet the relevant requirements of auditing standards in a number of significant aspects and demonstrated a serious lack of competence. The regulator also said the audit engagement partner failed to exercise professional judgment and scepticism during the audit of certain borrowings and their use.
NFRA’s action on auditors is part of efforts to improve the quality of audits and financial statements.
The regulator oversees the statutory audit of public interest entities which are defined as listed and large unlisted companies.
The watchdog is now in the process of introducing more transparency requirement for auditors by way of a mandatory annual report that auditors have to publish giving finer details of their relationship with the audited entities and network relationships with other professional service firms.
In the past, NFRA had examined the audit quality of entities in the IL&FS group and had held that some of the auditor engagements as void as the regulator felt that some other firms in the auditor’s alleged network had rendered certain services amounting to indirect rendering of allegedly impermissible non-audit services to the audit client.