NFRA pulls up IL&FS Financial Services' auditor after finding lapses in procedure
As per the report, BSR and other entities in its network used “de facto” the KPMG trademark and branding to provide audit and non-audit services while making “clearly futile attempt to show a de jure (legal) separation from KPMG.”
August 18, 2020 / 01:46 PM IST
The National Financial Reporting Authority (NFRA) said KPMG affiliate BSR and Associates is not eligible to be statutory auditor of IL&FS Financial Services (IFIN) after finding lapses in procedure.
This comes after the regulator’s audit quality review report, released on August 17, found BSR violated the provision of non-audit services and had business relationships with IFIN at the date of its appointment, said a report by Business Standard.
As per the review report, BSR and other entities in its network used “de facto” the KPMG trademark and branding to provide audit and non-audit services while making “clearly futile attempt to show a de jure (legal) separation from KPMG.”
“The non-audit services provided technically by the KPMG-labelled entities of the network are clearly services indirectly provided by the BSR entities, and result in gross violations of the independence requirements for auditors laid down under the Companies Act, as well as the Code of Ethics mandated by the Institute of Chartered Accountants of India,” the report said.
BSR on its part said it was reviewing the report in detail and was “concerned” by the NFRA report’s conclusions, adding that “all facts and circumstances transparently shared during the review were not given due consideration.”
The NFRA review report also noted that BSR failed to obtain “appropriate evidence” as required to support numbers in the financial statements; violated use of “going concern” assumption; found improper evaluation of the risk of material misstatements, and systemic and structural deficiencies in the IT processes which render the audit “completely unfit for its intended purpose.”
In a statement BSR said it would determine its response in due course, holding that audit quality “remains the cornerstone of our profession and recognise the challenges … we remain committed to support the NFRA’s efforts in this regard.”