Infrastructure Leasing & Financial Services (IL&FS) and subsidiary IL&FS Transportation Networks Ltd (ITNL) are mulling over the replacement of SRBC & Co, an Ernst and Young (EY) affiliate, as their statutory auditors after the National Financial Reporting Authority (NFRA) found serious auditing lapses by the firm.
"So far neither IL&FS/ITNL has asked SRBC to resign, nor has SRBC offered to resign. This is under examination and is being referred to the audit committee of ITNL for appropriate recommendation to the board of ITNL," IL&FS spokesperson Sharad Goel told The Economic Times.
The NFRA had found serious lapses in the statutory audit of IL&FS ITNL for 2017-18 fiscal, including that the company's losses were understated by at least Rs 2,021 crore.
The statutory audit was conducted by SRBC & Co LLP, Chartered Accountants.
In its Audit Quality Review Report (AQRR) of the statutory audit of ITNL for 2017-18, the regulator concluded that the initial appointment and continuation of SRBC & Co LLP was "prima facie illegal and void".
In a statement, SRBC said it was disappointed with the conclusions in the AQRR and was doing a detailed review of it.
The watchdog also flagged the failure of the auditor to appropriately evaluate the use of the going concern basis of accounting by the management and implications thereof in the auditor's report.
According to the statement, SRBC had performed the audit as per the applicable standards and highlighted the issue relating to going concern in its limited review report for the June 2018 quarter. "We are presently doing a detailed review of the report," it added.
ITNL is part of the IL&FS group where financial irregularities came to light in late 2018 and subsequently the corporate affairs ministry had also superseded the IL&FS board.[Inputs from PTI]