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NFRA bars auditors of 2 Anil Ambani group cos

New Delhi, May 21, 2024

National Financial Reporting Authority (NFRA) has banned auditors of Reliance Home Finance and Reliance Commercial Finance, including the firms, and also levied a penalty for irregularities in the accounts of the two Anil Ambani group companies in 2018-19. In both cases, new auditors had been appointed after Price Waterhouse had resigned suspecting fraud.

Auditor of Reliance Capital, another group company, had faced similar action last month. Anil Ambani's financial services group faced insolvency action and accounting frauds at group companies may increase the headache.

Reliance Home Finance auditor Dhiraj & Dheeraj has been fined Rs 1 crore and chartered accountants and partners at the firm Piyush Patni and Pawan Kumar Gupta have been slapped with a monetary penalty and barred for three-five years from taking up audit assignments.

Similarly, Reliance Commercial Finance auditor Shridhar & Associates has been handed a Rs 2 crore penalty, while engagement partner Ajay Vastani has been barred for five years and slapped a Rs 50 lakh fine.

Suspecting fraud, Price Waterhouse had resigned as the auditor of the company with assets of over Rs 13,000 crore and liabilities, including debt, of Rs 12,623 crore. Vastani was held guilty of accepting the engagement without communicating with PW, which was a deviation from the firm's quality policy.

The auditor issued "inappropriate emphasis of matter" in the audit report, which gave the impression that it agreed "fully with and reiterates the inappropriate disclosure" by the company. "The auditor also accepted the company's legal interpretation that there was no fraud and based on that dismissed any suspicions of fraud even while the matter was pending with the ministry of corporate affairs," NFRA said.

Besides, despite being aware of the report of suspected fraud by the previous auditor, Vastani gave a clean chit when it came to matter (of) dealing with section 142(12) (which deals with fraud) and failed to check the end use of loans, indications of siphoning of funds and other aspects, the regulatory agency said.

The findings are very similar to Reliance Capital.

In the case of Reliance Home Finance, which is a listed entity, PW had resigned, suspecting fraud at the company. Sebi had noted that the new auditor Dhiraj & Dheeraj had issued a qualified opinion for 2018-19 without making adequate disclosures. "The omissions and commissions of the auditor had rendered the audit report unreliable. The audit firm issued a qualified report while it was required to issue a disclaimer or adverse opinion, had the audit been concluded as per standards of accounting," NFRA said.

[The Times of India]

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