New Delhi: Suspecting widespread irregularities in the IL&FS case, the Ministry of Corporate Affairs (MCA) is doubting the auditors’ role in the episode.
“Prima facie, it appears that they (auditors) have many questions to answer in IL&FS. If they are found at fault, action is bound to happen,” said Injeti Srinivas, Secretary, Corporate Affairs.
“What is the gravity of the offence -- whether it is dereliction of duty, total negligence, collusion with management or abetting the crime and the extent of public interest involved -- will determine the quantum of action. It will be premature to pass any judgement on this at this stage,” he said.
While Srinivas did not name any particular auditor, reports have suggested that global auditing giant Deloitte and BSR & Associates, part of KPMG network, are among the entities under scanner allegedly for failing to flag loans that were granted in violation of norms by various IL&FS entities and to entities under severe financial distress and to those linked to top management personnel.
The case is being investigated by multiple agencies.
Emphasising that auditors are often referred to as ‘gate keepers’, Srinivas said the statutory auditor plays a key role in auditing the financial statements of a company. “If auditors work diligently, then auditing standards and accounting standards are capable enough to detect any widespread irregularity,” he said.
According to him, if it is a one-off fraud, then it can be accepted that the fraud might not get easily detected. “Where there are widespread irregularities bordering on fraud, then it is very difficult for any auditor to say that I did not see it at all or I believed the management's version,” he said.
“When they find such evidences, they should not blindly go by the management's version. When irregularities are glaring at you, then you have to cross verify facts if you are a good auditor,” Srinivas added.