This extreme action is being warranted after Deloitte’s alleged misdemeanors and its conduct in the IL&FS case.
If it happens, it would be the second such instance after Price Waterhouse Coopers(PWC) in the Satyam scam.
The Ministry of Corporate Affairs may invoke section 140 (5) of the Companies Act to bar the company, the report also said.
The government may soon ban management consultancy firm Deloitte over its alleged malpractices in Infrastructure Leasing & Financial Services (IL&FS) audit process, news agency IANS reported recently. The Ministry of Corporate Affairs may invoke section 140 (5) of the Companies Act to bar the company, the report also said.
If the management firm gets debarred, it would be the second such instance after Price Waterhouse Coopers (PWC) in the Satyam scam. While Price Waterhouse Coopers(PWC) was barred for two years, two of its partners were banned for three years.
Section 140 (5) of the Companies Act states: “Without prejudice to any action under provisions of this Act or any other law for the time being in force, the Tribunal either suo motu or on an application made to it by Central Government or by any person concerned, if it is satisfied that the auditor of a company has, whether directly or indirectly, acted in a fraudulent manner or abetted or colluded in any fraud by, or in relation to, the company or its directors or officers, it may, by order, direct the company to change its auditors.”
Replying to the charges, a Deloitte spokesperson told IANS, “Investigations on IL&FS Financial Service (IFIN) are in progress and we are cooperating fully. We reaffirm that we have conducted our audits in accordance with the auditing standards and applicable laws and regulations.”
The firm didn’t audit the group when the defaults started in May 2018, Deloitte maintained. IL&FS, IL&FS Transportation Networks Limited (ITNL) and IL&FS Financial Services Limited (IFIN) were being audited by other firms, it added.
Majority of the group’s subsidiaries that were located overseas were not audited by the firm, it added. The company also said that during the period it audited the account books of its group companies, the secured loans were sufficiently collateralized which were separately valued by other firms, the report also said.
On September 14, IL&FS Financial Services, defaulted in payments, term and short-term deposits and also defaulted on the obligations against commercial paper redemption on the given date. The very next day, the company reported that it received notices for defaults and delays, sending the market in a nervous mode. Soon after, ICRA downgraded the ratings of the short-term and long-term borrowing programmes of the group companies, adding more volatility to the share market.