In a big blow to Deloitte Haskins and Sells LLP, the auditor of IL&FS Financial Services Limited (IFIN), the National Financial Reporting Authority (NFRA) has indicted the auditor for its inadequate quality control system and processes that led to the scam in IFIN.
The NFRA, the new regulatory body for framing and enforcement of legislation relating to accounting and auditing, has in its Audit Quality Review report of the statutory audit for the year 2017-18 of IL&FS Financial Services Limited (IFIN), has concluded that "the failure to comply with the Standards on Auditing are of such significance that Deloitte did not have adequate justification for issuing the audit report".
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The audit regulator is now examining whether disciplinary proceedings under the relevant provisions of the Companies Act 2013 need to be initiated against Deloitte.
This is the first audit quality report of NFRA since its formation on 1 October 2018. The quality review was conducted as per the Section 132(2)(b) of the Companies Act, 2013 and NFRA Rules, 2018 which require the NFRA to monitor and enforce the compliance with accounting standards and auditing standards India.
In response, Deloitte exuded confidence that it conducted IFIN's audit in accordance to the set norms. "DHS LLP will conduct a detailed review into NFRA's report and is exploring its available options in relation to the joint audit of IFIN for FY 2017-2018. We remain confident that our audits have been performed in accordance with applicable laws, regulations and professional standards in India," a Deloitte India spokesperson told Business Today.