Deloitte seen facing ban over IL&FS accounting fraud
29 April 2019
Consultancy and accounting firm Deloitte Haskins and Sells may face ban for alleged fraud in the accounts of the beleaguered Infrastructure Leasing and Financial Services company, the second to be debarred after PwC in the Satyam Scandal.
The ministry of corporate affairs (MCA) is likely to invoke section 140 (5) of the Companies Act against the accounting firm Deloitte Haskins and Sells, one of the Big Four accounting firms, for alleged fraud in IL&FS accounts, according to a report in the Mint newspaper.
“Without prejudice to any action under the 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 the 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,” the section states.
The section allows the National Company Law Tribunal (NCLT) to act against auditors for malpractice.
IL&FS, one of India’s top NBFCs that lent heavily to big infrastructure projects, defaulted on its loan repayments in September 2018.
This default triggered a market-wide liquidity crisis in the Indian financial system. The company, at the time of default, has an accumulated debt of Rs91,000 crore.
It is claimed that Deloitte which was one of the prominent auditors of the firm and its many subsidiaries, did not fully report/audit the full extent of the financial irregularities in IL&FS books.
Deloitte, however, says it did not violate any norms and claims that its audits were in accordance with the standards on auditing and applicable laws and regulations.