The National Financial Reporting Authority (NFRA) on Wednesday slapped a five-year ban on an auditor for professional misconduct in the matter of S Kumars Nationwide Ltd for FY 2013-14.
NFRA enforces a five-year ban and a Rs 5 lakh fine on auditor Shyam Malpani for professional misconduct in auditing S Kumars Nationwide Ltd for the 2013-14 fiscal year, citing serious lapses and conflicts of interest.
The National Financial Reporting Authority (NFRA) on Wednesday slapped a five-year ban on an auditor for professional misconduct in the matter of S Kumars Nationwide Ltd for FY 2013-14.
The audit regulator also imposed a fine of Rs 5 lakh on Shyam Malpani, who was the engagement partner and signed the independent auditor's reports and the financial statements of S Kumars Nationwide Ltd (SKNL) for the period April 2013 to September 2014.
It also debarred Malpani for five years from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate.
The Central Economic Intelligence Bureau (CEIB), Ministry of Finance, vide letter dated September 2022, shared information about irregularities committed by the SKNL and its auditors.
After preliminary examination, NFRA suo motu initiated investigations into the professional conduct of the statutory auditors -- Malpani and SMMP & Company of SKNL.
SKNL was a listed company during the relevant period, and hence comes under the domain of NFRA. Thereafter, a Show Cause Notice (SCN) was issued to SMMP & Company and Shyam Malpani.
In its probe, NFRA's disclosed that Shyam Malpani - the SKNL's auditor for FY 2013-14, failed to meet the relevant requirements of the Standards on Auditing (SA) provisions of the Companies Act 2013 and the Companies Act 1956.
Shyam Malpani also demonstrated serious lapses was that he accepted the audit engagement of SKNL for FY 2013-14, despite owning the shares of SKNL through a company which was wholly owned by him and his family members and thereby violated applicable Laws and Standards relating to conflict of interest and independence, the order said.
Further, he had issued qualified audit opinions on standalone financial statements (SFS) and Consolidated Financial Statements (CFS) with eleven (SFS) and fifteen (CFS) qualifications respectively despite the fact that the nature and effect of qualifications in the Independent Auditor's Reports were material and pervasive to the financial statements, it added.
As per the rules, if effects of qualifications in the Independent Auditor's Reports are material and pervasive, the auditor is required to give either Adverse Opinion or Disclaimer of Opinion.