Deloitte could lose MCX account if auditing found lax: FMC

May 09 2014, 08:14 IST
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Delloite has been the auditor of MCX for six of the last nine years. Delloite has been the auditor of MCX for six of the last nine years.
SummaryPwC report had unearthed many questionable transactions in MCX whereas Deloitte had not.

Deloitte Haskins & Sells may not be reappointed statutory auditors to the Multi Commodity Exchange of India Ltd (MCX) if the Forward Markets Commission (FMC) finds the firm was lax in its auditing of the exchange.

“We have asked the exchange to review the work of the auditors to see whether they could have spotted some of the malpractices that the special audit by PriceWaterhouseCoopers did,” Ramesh Abhishek, chairman, FMC, told FE. Abhishek added that MCX had been advised not to appoint any new auditors till the review was completed, which was expected by the end of the month. “We are getting our people to do a similar review,” he said.

The FMC chief pointed out that although the nature of audits conducted by Deloitte and PwC were no doubt different, it was surprising that the PwC report had unearthed so many questionable transactions whereas Deloitte had not.

Delloite has been the auditor for six of the last nine years. The PwC report, released on April 29, said MCX had spent about Rs 649 crore over the years for services stipulated to have been rendered by FTIL under various agreements, noting the total paid by MCX to disclosed related parties was approximately Rs 709 crore. The audit summary also raised red flags on “known” and “additional” related parties.

It noted that while MCX and the FT group disclosed names of 235 related parties, background checks and public domain checks on these identified 676 additional entities or individuals who could be deemed to be directly or indirectly related to either MCX or the FT group, Financial Technologies (India)(FTIL) key management personnel or their immediate family members.

It alleged that of these related parties, select entities or individuals were identified as being members or clients who traded on MCX platforms over the years. In a reply to FE, Deloitte said a forensic audit differs in scope from a statutory audit. "The fact is, the recorded related party transactions were disclosed in the MCX RHP and in the company's annual reports, for the benefit of all of MCX's shareholders. This is in keeping with accounting standards which require that such related party transactions, which are not necessarily carried out at arm's length basis, should be disclosed. The auditors ensure that recorded related party transactions are appropriately disclosed to the shareholders, which requirement was followed."

The PwC report also identified 15,131 instances

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