RBI has barred one of the country's top auditors from looking at the books of any company regulated by the central bank
Reserve Bank of Indiais beginning to execute its enforcement framework announced in 2018 that brought non-banking financial companies (NBFC) under tighter scrutiny.
- Under this framework, the central banker has barred Haribhakti & Co LLP from auditing any entities regulated by the bank – this includes banks and NBFCs.
RBIhad banned EY member firm SR Batliboi & Co for one year for lapses in its statutory audit of specific banks.
AdvertisementIndia’s central bank, the Reserve Bank of India (RBI), banned Haribhakti & Co LLP, an audit firm, from undertaking any audits of banks, non-banking financial companies and other entities regulated by the RBI for a period of two years.
“This action has been taken on account of the failure on the part of the audit firm to comply with a specific direction issued by RBI with respect to its statutory audit of a Systemically Important Non-Banking Financial Company (NBFC),” RBI said in a press release on Tuesday.
The ban on Haribhakti & Co LLP is amongst the first few under the RBI’s enforcement action framework for statutory auditors, announced in June 2018, which has provisions to debar audit firms which have “serious” lapses in their audits of banks.
The central bank’s release underlines that the auditors in question have not complied with a specific direction under this framework.
According to the press release, Haribhakti & Co LLP will not be allowed to audit any entity that is regulated by the RBI. This ban comes into effect from April, 2022 and will be in force for two years. The auditors will be allowed to complete their existing audit assignments in the financial year 2021-22.
In this case, RBI has not specified the “systemically-important” NBFC. As of 2019, there were 275 such entities and the list includes the likes of Bajaj Finance and Bajaj Finserv, Shriram Transport Finance, Power Finance Corporation, among others.
Some of the companies that have been audited by Haribhakti & Co LLP include Birla Sunlife AMC, Axis Bank, IndusInd Bank and SREI Infrastructure Finance as well as SREI Equipment Leasing.
It is worth noting that this is not the first action that RBI has taken against auditors. Earlier, it had banned SR Batliboi & Co., one of the top auditors in the country and a partner of global audit firm Ernst & Young (EY), for lapses in its statutory audit of banks.
Reports at the time suggested the banks were Yes Bank and Axis Bank, and the lapse was in not correctly identifying the non-performing assets of the banks to the tune of over ₹13,500 crore.
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