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More action against pre-2018 Audit Violations likely - NFRA

Posted Date : 18-Jan-2024 , 06:35:02 pm | Posted By CASANSAAR print Print
The National Financial Reporting Authority (NFRA) would take further actions on defaulting auditors this year, for pre-2018 cases as well, chairperson Ajay Bhushan Pandey said on Tuesday. The NFRA’s move follows the National Company Law Appellate Tribunal’s (NCLAT) ruling in December that provided more clarity on the audit regulator’s retrospective jurisdiction.

“Any doubt or confusion that may have existed among a section of the auditor community has now been removed by this judgement of NCLAT,” Pandey said, adding the regulator’s actions this year would include not only instant cases but the past cases also.

On December 3, the NCLAT held that the NFRA has “clear and required” retrospective jurisdiction over the alleged offences by chartered accountants for the period prior to formation of NFRA, which was set up in 2018.

Pandey said: “it’s a well settled law that a ‘procedural law’ is presumed to retrospective unless stated otherwise.” There are several Supreme Court judgements, pertaining to civil and criminal proceedings, which support the same principle. “That is why, right from its establishment, NFRA has been holding this view and has been covering audits which were done even prior to 2018,” he said.

The observations were made by the NCLAT as part of the ruling which upheld the NFRA’s orders against the erstwhile Dewan Housing Finance Corporation Ltd (DHFL) auditors.

In 2020, the Enforcement Directorate had reported an operation against alleged bank fraud of about Rs 3,700 crore by the promoters of DHFL, following allegations of misappropriation of public funds to the tune of approximately Rs 31,000 crore.

In reaction to the probe, NFRA had initiated an Audit Quality Review (AQR) to probe into the role of the statutory auditors of DHFL for 2017-18. During the review, NFRA found out that 33 engagement partners/branch auditors had signed the ‘Independent Branch Auditors’ Report’ for nearly 250 branches of DHFL.

The NCLAT had observed: “NFRA, as an independent audit regulator has been entrusted by the Parliament after great debate for protecting public interest including of the creditors by exercising effective oversight over accounting and auditing functions.” (Source - Business Standard)

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