An official order was issued by the NFRRA to the auditors of Tanglin Developments Ltd. (TDL), a group company of Coffee Day Enterprises LTD., for their alleged lapses in the audit of FY20 as part of broader investigations into financial irregularities within the group.
The NFRA’s order, which was posted on the regulator’S website, resulted in a fine of one crore for Sundaresha & Associates and imposed censorship for four years while being barred from serving as an auditor or internal auditor of any company.
The audit firm has challenged NFRA’s show cause notice in court. The auditors have raised doubts about the legality of the notice and investigations conducted by NPFA, and since the matter is sub-judgment, this order does not address them.
The NFRA recognized that the auditor had included a “disclaimer of opinion” in the audit report, as it highlighted certain matters related to financial statements and internal financial control over financial reporting.
An auditor’s disclaimer is employed when they are unable to make a decision on the general financial statements. It denotes that the auditor does not hold any opinion about the financial reports’ accuracy or fairness.
NFRA reported that the audit firm was not permitted to comment on whether the company had maintained its books of accounts as required by law and whether their Financial Statements met accounting standards because the auditor identified the issues in his audit report.
NFRA claimed that the auditor has failed in its statutory duty and did not report fraudulent diversion of funds. The regulator also stated that auditors have disclaimed their opinion that certain funds cannot be refunded, stating that standards on auditing do not allow for reporting of other misstatements once a disclaimer on ‘a specific aspect’ is given.
Two audit engagement partners of the firm were fined and debarred for five years by the regulator. Despite seeking comments from CCD, an email sent on Monday to the audit firm and engagement partnerships regarding this story was not responded to.
The NFRA order stated that investigations into TDL’s auditors were initiated by the governing body, NDRA, after Sebi disclosed an investigation into suspected misappropriation of funds from specific operations of Coffee Day Enterprises Ltd. to a promoter-owned company.
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