NFRA slaps 10-year ban, imposes Rs 5 lakh fine on auditor for lapses

The National Financial Reporting Authority on Thursday slapped a penalty of Rs 5 lakh and a 10-year ban on an auditor for alleged professional misconduct in the audit of Bartronics India Ltd for 2013-15.

Bartronics India Ltd (BIL) is listed on BSE and NSE.

In its order, NFRA said that it had imposed a fine of Rs 5 lakh on T Raghavendra, proprietor of T Raghavendra & Associates and he was the engagement partner (EP) for the statutory audit of BIL for FY2013-15.

Besides, Raghavendra was also barred for a period of 10 years from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate, it added.

The following penalty and prohibition will take effect after 30 days from the date of issuance of this order.

The order came after the regulator received information from the ministry of corporate affairs (MCA) regarding irregularities observed by financial reporting review board (FRRB) of ICAI in the financial statements of FY 2013-15 of Bartronics.

ICAI is the Institute of Chartered Accountants of India.

Thereafter, NFRA initiated an investigation under the Companies Act 2013, into the role of the statutory auditors, Raghavendra, for the audit of financial statements for FY 2013-15.

In its probe, the regulator found that EP had committed professional misconduct by misusing the emphasis of matter for covering up misstatements in the financial statements and including under the "Emphasis of Matter", the matters that warranted consideration for modifying his audit opinion.

These matters included non-provision of interest on loans, doubtful capital advances etc.

Also, the regulator observed that the investigation has brought out various other lapses in the statutory audit such as not reporting the failure of the company to report under the norms and wrong recognition of deferred tax assets etc, the order said.

Despite repeated communication, T Raghavendra did not submit the audit file and standard on quality control (SQC) policy of the audit firm forcing the regulator to conclude that he either had no such documents with him or he is unwilling to cooperate with the regulator in discharge of its statutory responsibility, NFRA said in the order.

This is a professional misconduct as NFRA has powers of civil court under the norms in respect of discovery and production of books of account and other documents and inspection of any books, registers and other documents of any person summoned, it added.