New Delhi, July 22 (SocialNews.XYZ) In a stringent action against a high-profile chartered accountant of the Big 4 audit firms, the National Financial Reporting Authority (NFRA) has barred Udayan Sen for seven years from being appointed as auditor and levied a penalty of Rs 25 lakh for his role as engagement partner in the statutory audit of ILFS Financial Services Ltd (IFIN).
The NFRA has said in the order that in terms of the order passed by the Delhi High Court on June 26, the NFRA order shall not be given effect till July 31.
In an 88-page order on Wednesday, the NFRA bench comprising chairperson R. Sridharan and member Prasenjit Mukherjee said, "Professional misconduct becomes very serious when the CA has gone along with the management of the company in agreeing to the mis-statements or omissions so as to commit a fraud on the users of the financial statements.
"In this case, it is seen clearly that the company had actually incurred losses in the year 2017-18. It was only through such unacceptable or impermissible stratagems as the imputation of a value of Rs 184 crore to the put option on the Tata Tele Services Ltd (TTSL) shares that the actual incurred loss was turned into a reported profit."
"Besides the fact that the company had ceased to comply with the stipulated net owned fund (NOF) or capital to risk weighted assets ratio (CRAR) norms was deliberately mis-stated. CA Udayan Sen went along with this attempt at fraudulent presentation of a financial statement. Hence this would necessitate the imposition of a severe penalty," the order said.
"As engagement partner, it was the duty of CA Udayan Sen to take necessary preventive action to ensure that his and his firm's independence was not affected. He had been managing partner and CEO of Deloitte for several years.
"His position in the audit firm, his standing in the profession and his long experience required him to be especially conscious of and be sensitive to anything that could detract from his and his firm's independence. This background makes the violation of independence that has been proved even more serious than it would have been in the case of any other partner. This was a serious lapse on the discharge of his duty by CA Udayan Sen," NFRA said.
Commenting on the conduct of CA Sen, the bench stated, "The engagement partner had also violated the Companies Act, Standard on Quality Control (SQC 1), Code of Ethics, and RBI Regulations as well. While there is such a huge gap in audit procedures, the engagement partner signed an unmodified audit report on the general-purpose financial statements of IFIN, thus concluding that the auditor had obtained reasonable assurance that the financial statements as a whole are free from material mis-statements due to fraud or error. Having done all such violations, the engagement partner stated in his modified report that the audit was conducted in accordance with the standards of auditing, which is not true to the facts."
On January 17 this year, NFRA had sent a show-cause notice to Sen, who was the engagement partner for Deloitte in the statutory audit of IFIN for the year 2017-18.
The notice had asked Sen why action should not be taken against him for professional misconduct in the statutory audit of IL&FS Financial Services (IFIN).
Sen had stepped down as the CEO of Deloitte India in 2015 and retired as a partner of the firm earlier this year.
Source: IANS
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