IL&FS crisis: CA Institute holds statutory auditors ‘prima facie guilty’

The Institute of Chartered Accountants of India (ICAI) has held certain statutory auditors of the beleaguered IL&FS Group, including its parent IL&FS Ltd and two of its subsidiaries IL&FS Transportation Networks Ltd (ITNL) and IL&FS Financial Services Ltd (IFIN), “prima facie guilty” of professional misconduct.

With this, the legal decks are now cleared for full-fledged investigations against those partners of the three top-notch Indian audit firms responsible for the statutory audit of these companies, sources said.

The ICAI is now understood to have sent a formal communication to the partners concerned of the three firms — Deloitte, Haskins & Sells, BSR & Associates LLP and SR Batliboi.

Without getting into the details, ICAI , in a written reply to BusinessLine, confirmed that the statutory auditors concerned of IL&FS Ltd and two of its subsidiaries — IFIN and ITNL — have been held prima facie guilty of professional misconduct for the financial years 2016-17 and 2017-18.

In the case of parent and holding company IL&FS Ltd, the statutory auditor for 2017-18 was SR Batliboi.

For the financial year 2016-17, the statutory auditor was Deloitte, Haskins & Sells.

In the case of ITNL, the statutory auditor for 2017-18 was SR Batliboi. For 2016-17, there was a joint audit by SR Batliboi and Deloitte, Haskins & Sells.

In the case of IFIN, Deloitte, Haskins & Sells and BSR & Co were joint auditors for 2017-18. Deloitte, Haskins & Sells was statutory auditor of IFIN for 2016-17.

It may be recalled that the ICAI has been demanding powers to proceed against errant audit firms.

Currently, disciplinary proceeding can be initiated only against the signing partners or those responsible for the statutory audit work.

“The disciplinary jurisdiction of the ICAI extends to its members responsible for audit. The CA Act does not empower the ICAI to proceed against audit firms,” said Ashok Haldia, former Secretary, ICAI.