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Wednesday, April 17, 2019

3 of the Big 4 firms caught in IL&FS mess - economic news of india - world economic news - economics news for students - indian economy news

3 of the Big 4 firms caught in IL&FS mess
MUMBAI: The newly formed regulator for auditors is probing the role of three of the big four auditors in the alleged financial irregularity in Infrastructure Leasing & Financial Services and two of its group companies.National Financial Reporting Authority (NFRA) has asked Indian arms of EY, KPMG and Deloitte to furnish last few years’ financial details of IL&FS, IL&FS Transportation Networks (ITNL) and IL&FS Financial Services (IFIN), four people with direct knowledge of the matter told ET. “NFRA had issued a letter and sought we submit some financial details including audit reports and documents supporting that for the last three years,” said a person working with IL&FS Group. “We understand that there would be a detailed scrutiny of the audits.” He said the letters were issued to the firms in the last week of March.This is the first probe NFRA has undertaken after it came into force in November last year under the corporate affairs ministry. 68915381 NFRA would scrutinise the audited accounts and role of the auditors when they audited debt ridden IL&FS and its affiliate firms, the sources said. Investigations would also look into whether the audits were carried out in a negligent or fraudulent manner, said one of the persons close to the development.Some of the senior audit partners ET spoke with insisted it’s incorrect to call the exercise undertaken by NFRA an investigation. “It’s more like an audit quality review,” said one.A legal expert who is aware of the development said the probe raises the question whether the regulator can investigate an irregularity retrospectively—that is, any alleged irregularity or scam that happened before it came into force. “When the alleged irregularity happened in IL&FS and its group companies, NFRA was non-existent. This point could be challenged in the courts as this probe is retrospective in nature,” he said.None of the auditors commented on this point. Two of the people close to the development said the issue was never discussed internally after the NFRA notices. “As a policy, we cannot comment on company or client specific matter,” a KPMG spokesperson said.Questionnaires sent to EY and the corporate affairs ministry did not elicit any response as of press time on Tuesday.
Source: ET