ICAI initiates probe into auditors role after FTIL report withdrawn

Written by Ashish Sinha | New Delhi | Updated: Sep 26 2013, 15:06pm hrs
Taking cognizance of media reports, the Institute of Chartered Accountants of India (ICAI), the regulating body for auditors, has initiated investigation into the role of auditors and auditing practices at Financial Technologies India (FTIL) and its subsidiary, National Spot Exchange (NSEL).

This comes after the auditors, Deloitte Haskins & Sells, of Jignesh Shah-led FTIL withdrew the audit report on the companys standalone and consolidated financial statements for fiscal 2012-13, owing to (the) purported crisis at NSEL. The audited accounts were to be presented at FTIL's annual shareholder meeting, but the auditor redflagged the financial statements and withdrew its report on Tuesday. Sources said NSELs auditor, Mukesh P Shah & Co, has also withdrawn the report.

There are certain provisions in the auditing standards that allow an auditor to withdraw report. We are looking into it. We have initiated necessary action. First, information will be sought from the relevant entities after giving them suitable opportunities. We may also coordinate with government agencies who are already probing NSEL, ICAI president Subodh Kumar Agrawal told FE.

Agrawal said the disciplinary committee of ICAI has already sought information from Forward Market Commission and now it will seek information/documents/filings from the auditors of FTIL and NSEL.

NSEL, a firm promoted by FTIL, is currently facing a crisis of settling R5,500-crore dues to 148 members/brokers, representing 13,000 investor clients, after its trade was suspended on July 31 by government orders.

As per the rules of ICAI, the auditors concerned will be given an opportunity to share their reports within 21 days.

This could be an information-based complaint where the disciplinary committee will interact with all parties involved. This process will take time if more information is required after the initial submissions are made, said a senior ICAI functionary.

Sources said ICAI will be consulted after the investigation report is finalised by the Serious Fraud Investigation Office (SFIO) and the Registrar of Companies (RoC), the two entities under the corporate affairs ministry that are already conducting investigations into the affairs of FTIL and NSEL.

The panel chaired by economic affairs secretary Arvind Mayaram has already recommended an inquiry by government bodies into violation of laws by various entities in NSEL, including the enforcement directorate, income-tax department and the SFIO.