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ICAI says 3 auditors responsible for IL&FS fiasco, sends notices to them

Notices were issued to partners of Deloitte Haskins and Sells, BSR & Associates LLP and SR Batliboi. The auditors have been asked to appear in Kolkata this week for hearing

IL&FS
IL&FS
Veena Mani New Delhi
Last Updated : Dec 25 2018 | 11:58 AM IST
Chartered accountants body ICAI has sent notices to partners of three auditors that it finds them responsible for the IL&FS fiasco prima facie and disciplinary proceedings will be initiated against them.
 
Notices were issued to partners of Deloitte Haskins and Sells, BSR & Associates LLP and SR Batliboi. The auditors have been asked to appear in Kolkata this week for hearing. 
 
However, senior people in Deloitte said it will contest the ICAI's notice in its reply. The Institute of Chartered Accountants of India (ICAI) has found the audit firm responsible on "operational" grounds, whereas the company is an auditor.
 
"The issues the institute has raised are all on operational grounds, which are beyond our jurisdiction. The auditor concerned will respond and the firm will back him," a senior Deloitte official said.
 
Besides ICAI, the National Financial Reporting Authority (NFRA) will also inquire into the matter, sources said.
 
The official cited above said the ICAI was in a hurry to wrap up the case before the NFRA inquiry. The NFRA is yet to call the audit firm for questioning.
 
The government has already sent the IL&FS case to the NFRA, asking it to investigate the role of the auditors.
 
The firm's officials also argue that they have no role to play in the downfall of IL&FS as they resigned as auditors of the company in March 2017.
 
The sources said various people are asking as to why the ex-auditor for the parent entity of IL&FS did not look into the books of the subsidiaries, sources close to the development said.
 
They said Deloitte was not the auditor of the subsidiaries but only of the parent company and, hence, the auditing books of the former did not come under its domain.
 
IL&FS has 348 subsidiaries and associates -- most of these have a negative net worth. The earlier estimates of the subsidiaries were about half this number.
 
Meanwhile, the government has moved the National Company Law Tribunal (NCLT) to re-open IL&FS books under Section 130 of the Companies Act 2013. The Section has been invoked for the first time. It relates to re-opening of book of accounts of companies on NCLT or the court's order.
 
The government will check the balance sheets of the beleaguered group and its two listed subsidiaries -- ITNL and IL&FS Financial Services -- after the Serious Fraud Investigation Office (SFIO) found details of alleged corruption, personal enrichment and other non-transparent deals.
 
IL&FS owes Rs 940 billion to its lenders. Of its assets, those worth Rs 200 billion are intangible and cannot be recovered. The government has already suspended the board of IL&FS and appointed a new board to manage the company.

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