PwC’s initial findings in IndusInd Bank might have necessitated forensic audit

IndusInd Bank

A PwC probe to examine the extent of hit on the financials of IndusInd Bank due to certain deficiencies in accounting practices of derivative instruments is said to have resulted in the lender ordering a forensic audit, sources have told Moneycontrol.

Formally, the exercise carried out by PwC has been called a review by the bank.

According to the sources,  a final report is likely to be placed before the board of IndusInd Bank by the end of this week (March 28).

It is learnt that even before the final report is placed before the board, a forensic audit, which is underway, may have been initiated based on certain initial findings of the exercise carried out by PwC.

According to people aware of the investigation, PwC faced internal pushback leading to significant delays while carrying out the investigation.

“PwC was hired by IndusInd Bank to do the external investigation in October last year but it wasn’t till early this year that some progress could be made,” a source said.

As PwC was appointed by the bank to ascertain the financial implication of the accounting deficiencies, there were instances of resistance when the audit firm sought corroborative data not directly related to the accounting lapses, sources said.

What also triggered the need for an elaborate forensic audit is the possibility that the accounting practices in question may have been carried out for at least five to seven years.

“When something like this happens for over a long period of time, it’s unlikely that it is casual negligence,” said a person who was associated with the investigation.

“Such instances point at likely lapses in corporate governance which is what Grant Thornton will ascertain in its forensic probe,” a senior official said.

An email sent to RBI seeking confirmation of whether it was aware of initial findings by PwC remained unanswered.

“The bank has not received any report from the external agency,” a spokesperson for IndusInd Bank said in an email in response to Moneycontrol’s queries.

On March 10, the Mumbai-based private bank told stock exchanges that there may be accounting lapses in some derivative instruments leading to a 2.35 percent hit on its net worth as of the December 2024 quarter.

In a call with investors the same day, CEO and MD Sumant Kathpalia said the net impact of the lapse was estimated at Rs 1,500 crore but nothing could be said with certainty until the investigation by an external agency throws up with a number.