The National Financial Reporting Authority (NFRA) on Wednesday imposed a seven-year ban and penalty of Rs 25 lakh on Udayan Sen in connection with alleged irregularities in audit of IL&FS Financial Services Ltd (IFIN).
However, the latest ruling would not be in force till July 31 on account of a Delhi High Court order. Sen was an engagement partner of Deloitte Haskins and Sells LLP, which conducted the statutory audit of IFIN for 2017-18.
IFIN is part of diversified IL&FS group where a financial crisis came to light in late 2018. Citing the court order passed on June 26, NFRA said the authority's order "shall not be given effect" till July 31. The court is expected to hear the matter on July 31.
In February, Sen had moved the court challenging the jurisdiction of NFRA to look into the matter. In an 88-page order, the watchdog noted that professional misconduct becomes very serious when the chartered accountant has gone along with the company's management in "agreeing to misstatements/ omissions so as to commit a fraud on the users of the financial statements".
NFRA has slapped a monetary penalty of Rs 25 lakh on Sen. Besides, he has been "debarred for a period of seven years from being appointed as an auditor or internal auditor or undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate".
"As a professional accounting, we are surprised and concerned that the NFRA has chosen to issue and make public an order against a former partner of the firm," a Deloitte India spokesperson said. The spokesperson noted that this is in spite of the question of the NFRA's jurisdiction being sub-judice and awaiting adjudication and disposal by the Delhi High Court.
A former Deloitte India CEO, Sen retired from Deloitte earlier this year. In December last year, NFRA had said that DHS failed to comply with auditing standards with respect to statutory audit of IFIN.
The watchdog was set up in 2018 and comes under the corporate affairs ministry. On Wednesday, NFRA said that audited financial statements are the basic inputs for innumerable transactions in the economy.
"A breakdown, or severe damage, to the trust and confidence that the public and investors have in financial statements would have ramifications that go far beyond the limited activities of an auditee company," it said.
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