InvestorQ : What are the objections have now been raised about the IL&FS audit?
vaishnavi mhatre made post

What are the objections have now been raised about the IL&FS audit?

vidhya Laxmi answered.
10 months ago

The battle between stock markets and auditors continues unabated in the IL&FS case. The problems with IL&FS audit appear to be far from over. Now, the National Financial Regulatory Authority or NFRA has found serious deficiencies in the audit conducted by BSR.

This specifically pertains to the audit conducted by BSR of the financial services entity of IL&FS, better known as IFIN. The NFRA has, therefore, refused to approve the re-appointment of BSR as the auditors. BSR is an affiliate of KPMG.

NFRA gas specifically pointed out that while BSR provided audit services, KPMG provided other financial services in gross violation of the need to keep an arm’s length relationship between audit and consultancy. This was a clear conflict of interest in functioning.

However, the bigger issue was on the quality of audit. In FY-18, IFIN had reported net profit of Rs.201 crore. However, this profit was highly inflated due to non-provision for impairment of asset value. Even the derivative assets were valued at unjustified valuations.

The lapse was pointed out by NFRA as BSR had chosen to turn a blind eye to this lapse. When the adjustment was made, the actual loss was Rs.609 crore. According to NFRA, this is a fit case for not allowing BSR to renew its audit contract with IFIN.