NFRA Penalizes 18 Auditors of DHFL Imposes Rs 18 Lakh Fine, for Professional Misconduct

In a move the National Financial Reporting Authority (NFRA) Indias body for audits has taken strict action against 18 auditors who were found to have made mistakes while auditing different branches of DHFL the housing finance giant. The NFRA has issued orders debarring four auditors for six months and fourteen auditors for one year. Additionally, the auditors have been fined a total of Rs 18 lakh collectively with each auditor being penalized Rs 1 lakh due to instances of misconduct.

The list of auditors facing debarrment includes known names such as CA Aabhas Tiwari, CA D N Chaturvedi, CA Dhiraj Jain, CA Harish Sharma, Mangesh Vitthal Kekre, CA Mohammad Ayub, CA Nilesh Shah, CA P Poovalingam, CA P Rabi Kumar Patra,
CA Ramesh Chaturvedi,
CA Ramesh Pipalawa,
CA Rashmikant Kundalia,
CA Sanjay Soni,
CA Shrishail V Mantgol,
CA Sunil Jumani,
CA Vaman Kamath,
CA Vijay Singh Pamecha and
CA S K Senapati.

The NFRA initiated an audit quality review (AQR) on its own accord after media reports surfaced alleging the misappropriation of funds amounting to, around Rs 31,000 crore. The reported action taken by the Enforcement Directorate in April 2020 regarding an alleged banking fraud of Rs 3,700 crore, by DHFLs promoter/directors has further intensified the scrutiny. Specifically, the focus of the review was on the role played by DHFL’s Statutory Auditors during the year 2017 18 which’s when the purported fraud was believed to have taken place as per orders from NFRA dated September 29.

NFRA investigation uncovered violations committed by the auditors acting as Engagement Partners (EP) during their audit of DHFL branches. Notably, it was found that 33 EPs or branch auditors had submitted branch audit reports for 250 branches of DHFL. However, none of these appointments had received approval at the company’s meeting raising serious concerns about the integrity of the audit process.

The decisive action taken by NFRA sends a message to auditors and financial professionals underlining the significance of upholding exceptional standards of professional conduct and integrity, in financial auditing practices.