The National Financial Reporting Authority (NFRA) has imposed fines of up to Rs 8 lakh on two auditors and banned them for five years for professional misconduct in connection with DB Realty’s FY16 audit.
The order came after NFRA received information from Sebi in October 2022, regarding incorrect statements in the financial statements of DB Realty Ltd (now known as Valor Estate Ltd).
Thereafter, the regulator suo moto initiated the conduct of the statutory auditors of DB Realty Ltd (DBRL) under the Companies Act, 2013.
Separately, the NFRA imposed a fine of Rs 5 lakh on Chetan Desai and Rs 3 lakh on Rakesh Rathi. Both were partners of the audit firm Haribhakti & Co LLP, which was the statutory auditor of DBRL for the financial year 2015-16.
In addition, Desai and Rathi are prohibited for a period of five years, and three years, respectively, from being appointed as an auditor or an internal auditor or from performing any audit in relation to the financial statements or internal audit of the works and activities of any. company or association of companies, NFRA said in a 32-page order on Monday.
The auditor found that Chetan Desai failed to exercise skepticism and professional judgment, to perform appropriate audit procedures, and to obtain sufficient audit evidence during the audit of the 3,894.43 billion guarantees given to DBRL and its related entities.
In addition, Desai also failed to carry out proper audit procedures, and to obtain sufficient audit evidence during the audit of loans and advances amounting to Rs 1,326.92 crore given to DBRL, of which Rs 1,079 million were given to related parties, many of which were misfinanced. appropriate, said NFRA respectively.
NFRA noted that Chetan Desai is not involved in the major audit procedures conducted. His (Desai) involvement is limited to the preparation, review of financial statements and finalization of audit reports without involvement in major areas such as audit of controls and substantive testing.
Therefore, he failed to direct and supervise this engagement of auditors, said the administrator.
The regulator’s audit also revealed that Rakesh Rathi failed to conduct a proper review of key decisions made by the engagement team, it added.
