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India’s top watchdog for accounting and auditing standards, the National Financial Reporting Authority (NFRA), has initiated a probe involving several chartered accountancy firms connected with the audit of IndusInd Bank, a prominent private sector lender currently under scrutiny.
According to individuals familiar with the matter, NFRA recently issued notices to MSKA & Associates, the current auditor and a member of the BDO global network, along with several of the bank’s former statutory auditors.
The move follows emerging concerns over accounting discrepancies in the bank’s derivatives transactions, which reportedly span back to 2017. NFRA has requested the complete audit files from all statutory auditors involved during the affected period to examine their role and responsibilities.
“The objective is to verify the scope of each audit engagement, particularly with respect to the derivatives portfolio, and to review the audit evidence that supported the financial statements,” explained a source linked with one of the audit firms.
Among the auditors being scrutinized are PwC (2015-16 to 2017-18), S.R. Batliboi & Co. (2018-19), Haribhakti & Co. (2019-20 to 2020-21), and M P Chitale & Co, which collaborated with Haribhakti in 2021-22. For the 2023-24 fiscal year, MSKA & Associates and M P Chitale served as joint auditors. None of these firms have officially responded to media queries regarding the matter.
Sources suggest the alleged manipulation within the derivatives ledger allowed the Hinduja Group-promoted bank to either inflate profits or hide losses, depending on foreign exchange fluctuations. The NFRA's investigation aims to assess whether the auditors neglected irregularities or failed to detect signs of financial misrepresentation.
“Auditors have not yet submitted the requested data, but they are likely to comply soon,” noted a senior CA. “However, sharing certain data may require coordination with the Reserve Bank of India, as information related to loan exposures is regulated under the Banking Regulation Act.”
One key focus area in the audit documentation will be the Memorandum of Changes (MoCs)—critical records that highlight discrepancies or corrections in financial statements noted during the audit process.
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