‘Understatement of losses runs up to more than ₹2,000 crore’
The National Financial Reporting Authority (NFRA) has rapped ‘EY group firm’ SRBC & Co. LLP for failing to detect several problems in the IL&FS group’s transport venture while undertaking its statutory audit in 2017-18.
The auditor’s lapses had led to losses being understated by more than ₹2,000 crore, incorrect treatment of letters of comfort of ₹2,654 crore and improper valuation of the firm’s financial exposure to its associates, subsidiaries and joint ventures amounting to ₹3,346 crore, the accounting and audit regulator said.
In its audit quality review report (AQRR) released on Thursday, the NFRA also held that SRBC’s appointment to undertake the audit of IL&FS Transportation Networks Ltd. (ITNL) was ‘illegal’ as EY group firms had separately taken up other assignments with ITNL.
Responding to the NFRA report, the audit firm in a statement said: “We are disappointed with the conclusions in the Audit Quality Review report of ITNL for FY2017-18. SRBC had performed the audit as per the applicable standards and highlighted the issue relating to going concern in our limited review report for the June 2018 quarter. We are presently doing a detailed review of the report”.
“The company’s losses during 2017-18 were understated by at least ₹2,021 crore,” the NFRA highlighted in its AQRR of ITNL.
The NFRA also said the initial appointment of SRBC and its continuation as statutory auditor, was ‘prima facie illegal and void’ but that it had examined the firm’s audit performance ‘without prejudice’ to this finding.