Anil Ambani company Reliance Capital’s auditors will be asked if they knew about a fraud

MM,BCCL,MUMBAI
  • The government is planning to ask tough questions on the reasons why PWC quit as Reliance Capital’s auditor.
  • PWC resigned as auditors of Reliance Capital and Reliance Home Finance, citing interference.
  • BSR and Associates, which is a part of the global firm KPMG’s operations in India, resigned as the auditor of the IL&FS last month.
Auditors who are quitting troubled companies like Reliance Capital, Eveready Batteries and IL&FS will not be able to escape the strong arm of the law.

According to a report by Business Standard, the government is planning to ask tough questions on the reasons for quitting, and seek detailed information from auditors as well as clients.

This move came after the Price Waterhouse and Co’s (PWC’s) resigned as auditors of Reliance Capital and Reliance Home Finance on June 11. It has also filed a complaint against the, for alleged interference in its auditing role.

“We should go through all the steps. We cannot take a complaint at face value. We have to ask serious questions to the company, to the joint venture as well as the auditing company,” a senior official said.

Fraud in progress?

PWC filed a complaint with Ministry of Corporate Affairs against Reliance Capital in June. The complaint under Section 143 (12) of the Companies Act provides an auditor with a provision to report any fraud by companies to the government.

An auditor can resign on grounds of non-cooperation by the company. However, as a part of the investigation during the case, the auditor will also come under the scanner. Since the form they had filled is by auditors who are ‘aware’ of the company frauds, as per the BS report.

Abandoning a sinking ship

There has been a spate of auditor resignations as they seem to cut down their own risks, distancing themselves from the fraudulent practices of their clients.

Rating agencies and auditors too have been under the government radar for allowing companies to carry on with their questionable practices. As times have become tougher, a lot of frauds are coming to the fore, making government turn extra vigilant in the internal affairs of companies.

Amongst those who came under government net are top auditors like Deloitte, KPMG and EY for the role they probably played, in a multitude of scams.

BSR and Associates, which is a part of the global firm KPMG’s operations in India, resigned as the auditor of the IL&FS last month. The shadow bank is facing a probe for its financial irregularities as is turned insolvent, having a profound effect on the banks it loaned from, as well as the banking system.

Their ‘last minute’ resignation came a day before the hearing of a government plea which was seeking a ban on the audit company for five years in the National Company Law Tribunal.

SEE ALSO:
IL&FS case: The latest arrests in India's largest financial scandal of 2018 are for alleged money laundering
The auditor to Anil Ambani firm Reliance Capital says it wasn't allowed to do its job




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