IFIN case: Regulator says Deloitte didn’t comply with guidelines

The National Financial Reporting Authority (NFRA) has said that Deloitte Haskins & Sells, which audited the books of IL&FS Financial Services Limited, had failed to comply with the relevant accounting standards.

The regulator for auditors in the country said in a probe report Thursday that “the audit firm did not have adequate justification for issuing the audit report asserting that the audit was conducted in accordance with the SAs (standards of accounting).”

The NFRA report, however, did not mention any penalty against Deloitte.

NFRA, which is an agency of the Ministry of Corporate Affairs (MCA), said that Deloitte may have violated a clause that restricts a statutory auditor from providing other professional services to a company being audited.

“DHS LLP will conduct a detailed review into NFRA’s report and is exploring the available options," a Deloitte India spokesperson said. "The audit for FY 2017-2018 was a joint audit for IFIN. We remain confident that our audits have been performed in accordance with applicable laws, regulations and professional standards in India.”

According to NFRA, Deloitte was offering different services to IL&FS Financial, or IFIN. Such relationships could lead to potential conflicts of interest and biases, the report said.

NFRA’s investigation has focused on the IL&FS fraud after the infrastructure financier failed to meet its debt obligations last autumn, triggering a confidence crisis in India’s non-bank lending industry.

IFIN was audited by KPMG affiliate BSR in FY19 and jointly by BSR and Deloitte in FY18. Deloitte was the sole auditor of IFIN in FY16 and FY17.

The NFRA report released on Thursday speaks about the role of Deloitte.