CA NeWs Beta*: Did you know? 10 facts about Deloitte's FT audit

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Thursday, September 26, 2013

Did you know? 10 facts about Deloitte's FT audit

On September 24, a day before its annual general meeting, (FTIL) told exchanges that key resolutions were deferred.  One reason given was that Deloitte Haskins & Sells had some reservations about its audit following the crisis at NSEL, an FTIL subsidiary. Business Standard answers
some key questions.

When did Deloitte submit its audit report?
On May 30, nearly two months before the NSEL crisis broke out.

What are the key statements made by Deloitte?
The Big 4 firm has issued a certificate of compliance of conditions of corporate governance, and independent auditor’s reports accompanied by an annexure on stand-alone and consolidated financial statements. It certified these statements presented “a true and fair view” of the company’s affairs (balance sheet), profit (profit and loss account) and cash flow (cash flow statement).

Did Deloitte make any qualifications in its report?
No, there were no qualifications in the report on both stand-alone and consolidated statements. There were a couple of matters that were “emphasised”.

Who signed these reports?
Deloitte’s partner Rajesh K Hiranandani. A senior chartered accountant, Hiranandani has in the past audited several large companies such as M&M, Sun Pharma and India Infoline.

How much did Deloitte charge?
It charged Rs 28 lakh for the statutory audit. However, it earned Rs 23.9 lakh more from FTIL. It earned Rs 8 lakh on taxation matters and Rs 15.25 lakh “for other services”.

What did Deloitte do this week?
On September 23, Deloitte informed FTIL the audit report dated May 30 could not be relied on. The company in turn told exchanges it was deferring three key resolutions slotted for the annual general meeting on September 25.

Why did Deloitte make this statement?
Two events preceded the move. One is described in FTIL’s statement to exchanges as “communication of management of NSEL and statutory auditors of NSEL on the financial statements of NSEL”. Some reports have interpreted this as withdrawal of the audit report by the NSEL auditor as well. Secondly, the move came a day after the Mayaram panel submitted its report. Something adverse in this report could also have triggered the Deloitte move.

Did Deloitte withdraw its audit report?
No. Under the guidance note published by the ICAI, an auditor cannot withdraw a report once published. However, he can revise it.

What is the procedure for preventing reliance on the audit report already issued?
The auditor can take steps to prevent reliance when the management neither agrees to a revision of financial statements nor extends cooperation.

The auditor would notify those persons ultimately responsible for the overall direction of the entity that action will be taken to prevent future reliance on the report. The steps that can appropriately be taken will depend upon the degree of certainty of the auditor's knowledge.

What steps should the auditor take according to the ICAI?
a) Notify the client that the audit report must no longer be associated with the financial statements; (b) Notify regulatory agencies having jurisdiction over the client that the audit report should not longer be relied on; (c) Making an appropriate statement at the annual general meeting, if requested by the chairman.

Deloitte complied with clause (a). It did not do so for (c). Did it notified regulatory agencies as given in clause (b), it does not wish to say.

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