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Audit regulator National Financial Reporting Authority (NFRA) on Monday imposed a hefty penalty of Rs.10 crore, one of the highest in the history of the regulator, on BSR & Associates LLP, an independent audit firm which has a contractual relationship with KPMG, for alleged lapses in the audit of Coffee Day Enterprises Ltd or CDEL, the company that runs coffee chain CCD.
The audit watchdog also debarred two of BSR’s partners—one for 10 years and the other for five years.
The auditors did not report (allegedly) fraudulent diversion of funds despite having enough evidence that public money was moved to a promoters’ entity which had no business connection with the listed company
“The auditors did not report (allegedly) fraudulent diversion of funds despite having enough evidence that public money was moved to a promoters’ entity which had no business connection with the listed company,” the NFRA order said.
Queries emailed to Coffee Day Enterprises on Monday evening seeking comments for the story remained unanswered at the time of publishing.
BSR & Associates is disappointed with this order for the CDEL audit for the year ended 31 March 2019. The firm is currently assessing next steps and cannot comment further at this stage.
The regulator alleged that the auditors put on “their blinkers and when asked to explain, sought refuge in the provision of standard on auditing 600, relying on the work of auditors of the subsidiaries, while CDELs investments in these subsidiaries constituted a staggering figure of Rs.1,937 crores constituting 89% of the standalone balance sheet.”
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