Bilcare: NFRA Slaps Rs3 Lakh Fine, Debars CA Ratan Rathi for Misstating Financials for FY14-15 to FY16-17
Moneylife Digital Team 26 February 2024
Holding chartered accountant (CA) Ratan Laxminarayan Rathi, the engagement partner (EP), guilty of professional misconduct while performing the statutory audit of Bilcare Ltd for the financial year (FY)14-15 to FY16-17, the national financial reporting authority (NFRA) imposed a penalty of Rs3 lakh on the CA while barring him for two years from being appointed as an auditor or internal auditor or from undertaking any audit. 
 
In an order last week , the NFRA bench of Dr Ajay Bhushan Prasad Pandey (chairperson), Dr Praveen Kumar Tiwari and Smita Jhingran (full-time members) says, "The EP in the present case was required to ensure compliance with standards on auditing (SAs) to achieve the necessary audit quality and lend credibility to financial statements. As we have explained in this order, deficiency in the conduct of the audit, abdication of responsibility and inappropriate conclusions on the part of CA Ratan Laxminarayan Rathi establish his professional misconduct."
 
Market regulator Securities and Exchange Board of India (SEBI), on 16 June 2022, informed NFRA that the financial statements (FS) of Bilcare for the FY14-15, FY15-16 and FY16-17 did not present a true and fair view as the company did not recognise the full interest cost on its borrowings from banks which were classified as non-performing assets (NPA) by those banks.
 
According to NFRA, the FS of Bilcare were materially misstated due to partial recognition of interest cost on borrowings classified as NPAs by the banks in FY14-15 and FY15-16 and non-recognition of interest cost in FY16-17, resulting in under-statement of losses ranging from Rs56.5 crore to Rs114.32 crore which were  approximately 30% to 173% of the reported losses.
 
"The EP, instead of issuing a modified opinion, issued an unmodified opinion for the FY14-15 to FY16-17 and referred the matter in an emphasis of matter (EoM) paragraph in the auditor's report for FY16-17, which is in contravention of SA 706," the Authority says.
 
As EP, NFRA says, CA Rathi also failed to obtain sufficient appropriate audit evidence to verify the revenue, which is an item fraught with risk of fraud. "In addition, the EP did not carry out a proper audit of related party transactions (RPTs) of Bilcare, including loans and advances which were as high as 106.87% of the revenues. Moreover, with respect to granting of loans and advances to the related parties, the EP issued a false companies (auditor's report) order (CARO) report."
 
"Based on our investigation and proceedings under section 132 (4) of the Companies Act and after giving him opportunity to present his case, we find the EP guilty of professional misconduct and impose through this order a monetary penalty of Rs3,00,000. In addition, the EP is debarred for two years from being appointed as an auditor or internal auditor or from undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate," NFRA says in the order.
Comments
vyasvirendra
2 months ago
MCI regulates Allopathic doctors profession..institution of engineers regulates egineers here CAs are governed by ICAI but punished by NFRA..and hefty fines imposed on CAs ignoring the fact that 80 percent CA Firms are small practitioners consequently CAs are leaving auditing and attest function and in span of few years only Big 4 will remain in practice.We know how much fees they charge and what they do from their big establishments.ICAI is good for just taking exams and professional develoment of its members..UP Govt should take their help in coducting police constables exam that was rigged recently as no papers ever have been leaked in ICAI exam.
renukaviru
2 months ago
it is awelcome step by the reguratory body. where one can get the pendant cases?
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