IL&FS replaces auditor SRBC & Co amid allegations of professional misconduct by NFRA

• IL&FS auditor SRBC & Co has resigned with effect from September 28.
• The group’s board has appointed CNK Associates as the new auditor to the firm for fiscal 2022.
• The development comes amid recent allegations of ‘professional misconduct’ against SRBC.

Bankrupt infrastructure financier, Infrastructure Leasing & Financial Services (IL&FS), on Friday, said its statutory auditor SRBC & Co has resigned with effect from September 28, 2021.

“M/s SRBC and Co. LLP will be ineligible to continue as auditors of the Company for the financial year 2021-22 beyond September 30, 2021 having completed audits for three years,” it said in a stock exchange filing.

The IL&FS board has appointed CNK Associates as the new auditor to the firm for fiscal 2022.

The development comes amid allegations of ‘professional misconduct’ against SRBC, as per an assessment by the National Financial Reporting Authority (NFRA), part of the Ministry of Corporate Affairs. The NFRA reviewed the fiscal 2018 audit of IL&FS Transportation Networks Ltd. (ITNL).

In its September 23 audit quality review report, the government body alleged that SRBC, which used the EY logo and brand name in a misleading manner, and failed to provide adequate evidence supporting their assessment of the going concern status of ITNL.

The 343-page NFRA report, in its assessment, further alleged that SRBC,

• Failed to disclose material facts known to them which are not disclosed in financial statements.
• Failed to report a material misstatement known to them to appear in a financial statement.
• Not exercised due diligence, or have been grossly negligent in the conduct of their professional duties

Among other such allegations, NFRA concluded that SRBC did not perform the audit procedures in a consistent manner. “This renders the audit documentation completely unfit for the intended purpose. In not rectifying these deficiencies, the audit firm is guilty of serious professional misconduct,” it said.

In 2018, debt-ridden IL&FS group had gone bust creating a ripple effect in India’s shadow banking sector.

Recently the IL&FS board, led by billionaire banker Uday Kotak, said that it would resolve about 62% of the group's debt of nearly ₹99,000 crore, by the end of ongoing fiscal. As of April, the group has addressed debt worth ₹43,100 crore, short of its initial target to resolve about ₹50,000 crore by end of March.

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