- National Financial Reporting Authority (NFRA) has hit KPMG India’s BSR & Associates with a ₹10 crore fine.
- Barred two partners over audit failures related to Coffee Day Enterprises Ltd (CDEL) for FY19.
Auditors given huge penalty!
NFRA has imposed a massive ₹10 crore fine on BSR & Associates LLP, marking one of the largest penalties ever levied by the regulator.
Debarred partners
Along with the fine, NFRA debarred two of BSR’s partners Aravind Maiya and Amit Somani for 10 and 5 years respectively.
What does this mean?
- Cannot be appointed as an auditor or internal auditor
- Cannot undertake any audit of financial statements of any company or body corporate.
NFRA also imposed fines of ₹50 lakh and ₹25 lakh on the two debarred partners.
Reasons behind the penalty
The penalties followed an investigation by SEBI, which revealed a ₹3,535 crore diversion from Coffee Day Enterprises Ltd (CDEL) to a promoter-controlled entity. NFRA’s audit review found serious lapses, including:
- Ignoring key financial transactions, such as ₹1,937 crores transferred to subsidiaries.
- Failure to question loans provided to a related party that were disguised as advances for purchases worth 5x the value of the actual purchases.
- Issuing misleading audit reports.
Also read: NFRA imposes INR 2.15 Crore fine on 2 Auditors and 1 Audit Firm for Coffee Day Global Audit Failure
Response from BSR & Associates
BSR & Associates, the Indian audit partner of KPMG India, has expressed disappointment with the decision and is currently reviewing its options.
Who is NFRA?
The National Financial Reporting Authority (NFRA), an independent regulator established under the Companies Act 2013, oversees the auditing profession and Indian Accounting Standards.
Since its inception in October 2018, NFRA has been working to enhance audit quality through investigations, inspections, and quality review reports.
As of March 2022, Ajay Bhushan Pandey serves as its Chairperson.
To date, NFRA has issued over 80 orders to debar auditors found at fault.
Who is BSR?
BSR & Associates is the Indian Audit Partner Firm of KPMG India.
It has a presence in 14 cities in India with over 120 partners and an employee strength of over 5000 professionals.
The network firms are engaged in audit, tax, and advisory services catering to Indian businesses, multinationals, and listed companies in India across sectors.
Wrapping up…
This case highlights the critical need for stringent audit practices and holds auditing firms accountable for maintaining financial transparency.
It serves as a stark reminder of the importance of rigorous oversight in safeguarding financial integrity.
