PwC resigns as an Auditor of Eveready Industries
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After PWC told Eveready on Friday about its inability to continue with its audit mandate, the Eveready management appointed Singhi & Co as the new auditor on Saturday.
The development comes at a time when auditors are facing the regulators’ wrath for failing to flag suspected financial irregularities in the books of the companies they audit.
The ministry of corporate affairs recently approached the company law tribunal seeking a five-year ban against international auditing firm Deloitte Haskins Sells and KPMG affiliate BSR & Associates. The two firms were being blacklisted for failing to spot serious financial irregularities at IL&FS Financial Services (IFIN).
Eveready, part of the Brij Mohan Khaitan family, said in a regulatory filing that PWC had expressed its inability to continue as the auditors of the company “for the reasons included in the Basis of Disclaimer of Opinion on the financial statements and internal financial controls as given by them in the Auditors’ Report for 2018-19.”
Disclaimer of opinion in the audit parlance usually means that the auditor is offering no opinion regarding financial statements made by its client. This could happen for several reasons, including not having enough time or data to form an opinion.
In the auditors’ report with the financial result of Eveready for 2018-19, PWC said it could not obtain sufficient audit evidence to ascertain the extent of loss or potential liabilities relating to financial assistance that the dry cell battery maker provided to promoter group firms.
PWC noted that Eveready had extended Rs 197.8 crore in the form of inter-corporate deposits to certain promoter group companies and that interest worth Rs 31.37 crore thereon was outstanding at the end of March 31, 2019.
Eveready had also furnished Rs 283.09 crore worth of corporate guarantees and post-dated cheques in favour of banks and other parties who provided loans to group firms.
The auditor also noted that Rs 62 crore was given as an advance for leasehold right of a property on the basis of a memorandum of understanding. Even though the deed was not executed within the stipulated time, Eveready did not claim refund of the advance.
The management said these dues would be recovered in time and no provision is required to be made because repayment of the deposits/post dated cheques with future interest have been guaranteed by certain promoter directors of the company in the event of a default. It also said due diligence on the property was still going on and the advance could be taken back.
PWC disagreed. “We are unable to obtain sufficient appropriate audit evidence regarding the extent of the loss allowance / impairment to be recognised on these ICDs and advances and of the potential liability to be recognised for the corporate guarantees /PDCs, if any, and the consequential impact on the consolidated financial statements as at and for the year ended March 31, 2019 and accordingly, forms a basis for the disclaimer of opinion.” #casansaar (Source - PTI)
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