Deloitte: India

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2020

Former CEO gets 7-year audit work ban

Deloitte’s former CEO gets 7-year audit work ban, July 23, 2020: The Times of India

Why is former Deloitte CEO Udayan Sen guilty of misconduct?
From: Deloitte’s former CEO gets 7-year audit work ban, July 23, 2020: The Times of India

Held Guilty Of Misconduct While Auditing IL&FS Fin Services A/cs

New Delhi:

National Financial Reporting Authority (NFRA), the regulatory body for auditors of listed and large companies, on Wednesday announced a seven-year ban on former Deloitte CEO Udayan Sen from undertaking any audit work, holding him guilty of “professional misconduct” in audit of the accounts of IL&FS Financial Services (IFIN).

Sen, who was the engagement partner, also faces a penalty of Rs 25 lakh for the irregularities. IFIN is part of beleaguered IL&FS group, where massive financial irregularities came to light in late 2018, prompting the government to supersede the management and order investigations.

The execution of the order, however, depends on a case in the Delhi high court, where Sen has challenged NFRA’s jurisdiction, with the case slated to be heard on July 31.

“As a professional accounting firm we are surprised and concerned that the NFRA has chosen to issue and make public an order against a former partner of the firm, in spite of the question of its jurisdiction being sub-judice and awaiting adjudication and disposal by the hon’ble Delhi high court,” Deloitte India said.

In its 88-page order, the agency relied on provisions of the Companies Act to hold Sen guilty. NFRA chairman R Sridharan and member Prasenjit Mukherjee noted that there was a “serious lapse” in discharge of duty by Sen, who is a chartered accountant.

“In this case, it has been clearly shown that the independence in mind and independence in appearance of the statutory auditor had been totally compromised,” the order said.

The watchdog found him guilty of professional misconduct during the entire process and also said there was intentional reckless behaviour by Sen.

“Professional misconduct becomes very serious when the chartered accountant has gone along with the management of the company in agreeing to misstatements/omissions so as to commit a fraud on the users of the financial statements,” the NFRA order said.

It also said that there was deliberate mis-statement as the company had ceased to comply with the stipulated norms related to net-owned funds and capital adequacy ratio. “Chartered accountant Udayan Sen went along with this attempt at fraudulent presentation of the financial statements. Hence, this would necessitate the imposition of severe penalty,” the agency further observed.