Airlines Run into Audit Red-flags Over 'Going Concern' Status
PrintListen to this Article
Amid continuing difficulties in airline space to generate profits and raise funds, independent auditors of at least two Indian carriers have raised red-flags over their 'going concern' status claims.
Typically, a company is known as a 'going concern' if it has sufficient resources to continue to operate indefinitely and to avoid any potential bankruptcy risks.
While auditors of now-grounded Kingfisher Airlines have been raising red flags for a long time, auditors of low-cost carrier SpiceJet have pointed out in their latest quarterly review report the airline's total liabilities exceeded its total assets by Rs. 1,145.58 crore as on June 30, 2014.
"These conditions, along with other matters...indicate the existence of a material uncertainty that may cast doubt about the company's ability to continue as a going concern," SpiceJet's auditor SR Batliboi and Associates LLP said.
No provision has been made for interest of Rs. 7.5 crore up to June 30, 2014, relating to earlier years on the outstanding inter-corporate deposits taken by Spicejet.
If these amounts had been accounted for, SpiceJet's first quarter net loss, as also accumulated losses, would have been higher, the auditor noted. SpiceJet reported a net loss of Rs. 124.10 crore for the April-June 2014 quarter, as against a net profit of Rs. 50.56 crore in the year-ago period.
Jet Airways' auditors said in their latest report for the quarter ended June 30, 2014 that the company's continuance as a "going concern" depends on deeper synergies with Etihad Airways and its ability to raise funds in the future.
Kingfisher is yet to publish its financial results and the auditor report for the latest quarter ended June 30, 2014.
The auditors of all three listed airlines have been saying for last few quarters that the "appropriateness of the going concern basis" is dependent on their ability to generate adequate finance to meet obligations and to operate profitably.
However, the management of all three carriers have defended their decisions to prepare their respective financial statements on 'going concern' basis.
Kingfisher has faced most adverse auditor comments, while auditors for Naresh Goyal-led Jet Airways and Maran family-run Sun Group's Spicejet have also been commenting on their 'going concern' status.
With regard to Jet Airways' 'management statement' about alliance with Etihad and the subsequent positive impact on cash flows, its auditors said that this has been taken into account by the company for preparation of the financial statement on a going concern basis. (PTI - NDTV)
Category : Auditing | Comments : 0 | Hits : 647
In a boost to the National Financial Reporting Authority (NFRA), the regulator for auditors and audit firms dealing with large and listed companies, the Supreme Court has upheld an order by the National Company Law Appellate Tribunal (NCLAT) related to disciplinary action against errant auditors. Last month, the apex court dismissed an appeal filed by chartered accountant Sam Varghese, partner at K Varghese & Co. Varghese was one of the four auditors against whom NFRA had acted, and in...
Hindustan Unilever Ltd. has announced that its cost auditor has been disqualified from continuing amid a conflict of interest. The decision was made after it was discovered that Rasesh Vipin Chokshi, who is a partner at the firm R.A. & Co., was holding shares in the company. According to the Companies Act, 2013, a cost auditor cannot hold any shares in the company for which they're auditing the costs. Following this violation, M/S R.A. & Co. has been asked to vac...
The Bombay High Court has granted bail to Anita Kirdat, a former concurrent auditor of the Punjab and Maharashtra Cooperative (PMC) Bank, in connection with a multi-crore loan fraud case. Kirdat, 48, a chartered accountant (CA) from Bhandup, who runs a firm, Anita Kirdat and Company, was arrested by the Economic Offence Wing of Mumbai Police in 2019 in the PMC Bank scam. She served as the concurrent auditor of PMC Bank from 2005 to 2019. She was alleged to have been appointed at the behest...
Tighter regulations and lower fees are making the auditing profession challenging, said panelists at an international conference held by the National Financial Reporting Authority (NFRA) here on Tuesday. “The business model of pure audit is under significant pressure. It’s getting tighter and tighter from the point of avoiding conflict,” said Uday Kotak, former managing director and CEO of Kotak Mahindra Bank. Stating that regulators would want the best of talent in the audi...
The Comptroller and Auditor General of India (CAG), Girish Chandra Murmu, on Friday announced the setting up of the Supreme Audit Institution India’s International Centre for Audit of Local Governance (iCAL) in Rajkot, Gujarat. At the conclusion of the three-day international conference on ‘Strengthening of Grass Roots Democracy and Accountability’, Mr. Murmu said local governments played a pivotal role in shaping the lives of citizens. Effective accounting platforms and aud...
Comments