The National Financial Reporting Authority (NFRA) has released a comprehensive Audit Quality Review (AQR) report, scrutinizing the statutory audit of IL&FS Transportation Networks Limited (ITNL) for the Financial Year 2017-18, conducted by SRBC & Co LLP, Chartered Accountants.
The NFRA’s findings, outlined in the report, bring to light several critical observations. Firstly, the appointment and continuation of SRBC & Co LLP as the statutory auditor for ITNL were deemed prima facie illegal and void. Additionally, the report reveals the Audit Firm’s failure to adequately assess the going concern basis of accounting, leading to implications overlooked in the Auditor’s Report.
Furthermore, ITNL’s financial exposure to subsidiaries, associates, and joint ventures, totalling Rs. 3,346 crore, was found to be improperly valued per applicable Accounting Standards. The report points out that the company’s losses during 2017-18 were understated by at least Rs. 2021 crore, attributing this to unjustified reversals of Expected Credit Loss (ECL) and incorrect impairment valuations.
The NFRA also highlights the Audit Firm’s lapses in reporting material misstatements and maintaining documents as per SA 230, raising concerns about the integrity of the Audit File due to tampering and inconsistencies. This comprehensive AQR report underscores NFRA’s commitment to upholding and enforcing compliance with accounting and auditing standards in India, ensuring transparency and integrity in financial reporting.
