Deloitte Penalty: In ‘G’ case, Deloitte and three others were fined Rs 2 crore; Authority issued a 30-page order

The National Financial Reporting Authority (NFRA) has imposed a fine of Rs 2 crore on Deloitte Haskins & Sells for deficiencies in the audit of Zee Entertainment Enterprises Limited (ZEEL) during the financial year 2018-19 and financial year 2019-20. Apart from this, two chartered accountants have also been fined.

The NFRA has imposed a fine of Rs 10 lakh on CA AB Jani and barred him from being appointed as an auditor or internal auditor or conducting any audit in relation to the financial statements or internal audit of the functions and activities of any company or corporate for five years.

The regulator has imposed a fine of Rs 5 lakh on CA Rakesh Sharma besides barring him from being appointed as an auditor for three years. Jani was the Engagement Partner (EP) and Sharma was the Engagement Quality Control Review (EQCR) for the audit of ZEEL for the period FY 2019 to FY 2020. The authority has given this decision in a 30-page order.

The NFRA said in the 30-page order that in September 2018, the chairman of ZEEL, who is also the promoter of Essel Group of Companies, issued a letter to Yes Bank. ZEEL’s fixed deposits of Rs 200 crore were used as guarantee for loans given by Yes Bank to Essel Green Mobility Limited, a promoter group company.

The bank had adjusted the fixed deposits (FDs) to settle the outstanding loan amount from seven promoter group companies in July 2019. The order said the creation and maintenance of the FD and its adjustment by the bank were not approved by the company’s board or shareholders. The order said the statutory auditors failed to identify and report this misstatement.

“Our investigation revealed that the auditors were grossly negligent. They failed to exercise due diligence. They did not adequately challenge management’s claims and failed to evaluate reporting of suspected fraud,” the regulator said.