The National Financial Reporting Authority on Thursday said the appointment of Deloitte Haskins and Sells LLP (DHS) as the statutory auditor of IL&FS Financial Services Ltd (IFIN) for the year 2017-18 was illegal.

NFRA said in a supplementary audit quality review reportthat Deloitte was not eligible to be appointed as auditor due to alleged violation of Companies Act provisions barring certain persons as auditors. “DHS was not eligible to be appointed as such auditor due to violation of Sec 141(3)(e) (subsisting business relationships on the date of appointment) and Sec 141(3)(i) (provision of non-audit services directly or indirectly) of the Companies Act, 2013. 2,” NFRA said.

Deloitte India spokesperson said, “DHS LLP will review NFRA’s supplementary AQR report in relation to IFIN which was a joint audit for FY2017-18. We have been cooperating with the NFRA in respect of the review and remain confident that our audits, including our appointment, have been performed in accordance with applicable laws, regulations and professional standards in India.”

NFRA added that the instances of failure noticed are of such significance that it appears that DHS did not have adequate justification for issuing the audit report.

Earlier, NFRA had imposed a penalty of ₹25 lakh on some former Deloitte partners in the matter of statutory audit of IL&FS Financial Services, and had also barred the partners from being appointed as an auditor or internal auditor of any company.

In February, Deloitte had voluntarily announced that it would not offer non-audit services to firms audited in India.

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