The Reserve Bank of India (RBI) on Tuesday debarred audit firm Haribhakti & Co from undertaking audit assignments in any of the banking and non-banking financial companies (NBFC) for two years starting April 1, 2022 for failing to comply with its direction.
Haribhakti was the auditor of SREI Infrastructure Finance (SIFL), a listed firm, for 2019-20. The RBI superseded the boards of SIFL and Srei Equipment Finance (SEFL) on October 4 over governance concerns and payment defaults.
“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,” a statement uploaded on the RBI website said.
The audit firm, which is also a regular auditor of important banks, including state-owned banks, has been debarred under section 45MAA of the Reserve Bank of India Act. This is the first time that any auditor has been implicated under this act, a source said.
The RBI Act 45MAA talks about actions that can be taken if section 45MA is not adhered to. Section 45MA talks about the duties of an auditor of an NBFC.
It says an auditor of an NBFC would be duty-bound to inquire whether the firm being audited has furnished all the details on its deposits, assets, and liabilities, profit-and-loss account, etc. to the RBI that would form the basis of disclosure related instructions, or even special audit by the central bank on the firm.
The RBI’s communication suggests that the audit firm failed to do so, leading to the two-year debarment.
However, the action will not affect Haribhakti’s auditing assignments for the current fiscal 2021-22, the RBI said.
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