SRBC & Co LLP, part of EY India, has resigned as the auditor of IL&FS citing recent regulations issued by the Reserve Bank of India.
"SRBC and Co. LLP will be ineligible to continue as auditors of the company for the financial year 2021-22 beyond September 30, 2021 having completed audits for three years.
“We would further like to inform you that the Board of Directors of the company vide resolution dated September 29, 2021, subject to the approval from members, have approved the appointment of CNK Associates LLP as Statutory Auditor of the company for FY 2021-22," IL&FS said in a regulatory disclosure.
In a bid to ensure the independence of bank auditors, the RBI issued guidelines for the appointment of statutory central auditors or statutory auditors in April this year. Under the norms, it made joint audits mandatory for entities with an asset size of ₹15,000 crore and above, capped the number of audits a firm can perform in a year at four banks, and eight NBFCs and urban cooperative banks (UCBs), and reduced the tenure of auditors to three years.
Recently audit regulator National Financial Reporting Authority (NFRA) had found several audit failures on the part of SRBC & CO LLP in its statutory audit of the books of crisis-ridden IL& FS Transportation Networks Ltd ( ITNL), a subsidiary of IL&FS, for the financial year 2017-18. The Audit Quality Review Report (AQRR) had highlighted at least nine major observations including the point that the initial appointment of SRBC & Co LLP, and the continuation of SRBC & Co LLP as statutory auditor of ITNL, was prima facie illegal and void.
EY in a statement said that pursuant to the RBI guidelines for appointment of statutory auditors of Commercial Banks, UCBs and NBFCs, S R B C & Co LLP (SRBC) has completed its audit term as the statutory auditor of Infrastructure Leasing & Financial Services (IL&FS).
SRBC was appointed as the statutory auditor of IL&FS in September 2017 and has already served for a continuous period of 3 years (per the new RBI guidelines) which makes SRBC ineligible to continue as the statutory auditor of the company beyond September 30, 2021.
"We would like to thank the Board and members of the company for placing confidence in us for all these years," EY said.