Audit Lapses: NFRA Penalizes Firm and Auditors

The National Financial Reporting Authority has imposed a penalty of Rs 2.15 crore on an audit firm and two auditors owing to lapses found in the 2019-20 statutory audit of Coffee Day Enterprises Ltd. The auditors failed to address risks adequately, resulting in penalties and debarment.

The National Financial Reporting Authority has taken decisive action against Venkatesh & Co and chartered accountants Dasaraty V and Desikan G, imposing penalties totaling Rs 2.15 crore. These penalties relate to misconduct during the statutory audit of Coffee Day Enterprises Ltd for the 2019-20 financial year.

The regulators found significant lapses in the auditors' duties, such as failure to scrutinize and report fraud risks despite having necessary records. The auditors faced fines and temporary bans from audit activities: Venkatesh & Co was fined Rs 2 crore, Dasaraty V Rs 10 lakh, and Desikan G Rs 5 lakh. Both individuals were debarred from audit roles for 10 and 5 years, respectively.

The auditors issued a disclaimer of opinion on certain financial statements, citing issues with transactions worth Rs 3,512 crore. However, they ignored warning signs and failed to comply with auditing standards as required by law. This oversight prompted NFRA's action, underscoring its commitment to maintaining financial accountability.

(With inputs from agencies.)