NFRA takes action against auditors of Reliance Capital for lapses and fraud
NFRA), the regulatory body overseeing auditors and audit firms for listed and large companies, has taken action against Pathak HD & Associates (PHD), the joint auditor for Reliance Capital, formerly an Anil Ambani group company, along with its two auditors.
This move comes in response to multiple failures highlighted by the resigning auditor, Price Waterhouse (PW), which also flagged suspected fraud amounting to Rs 12,571 crore by the company.
Reliance Capital recently underwent a change in ownership, being taken over by the Hindujas after significant concessions by lenders. This development follows the Reserve Bank of India's decision in November 2021 to replace the board of the Anil Ambani Group company due to governance concerns and defaults in payments.
NFRA's order identified numerous lapses by Pathak HD & Associates and its key personnel, Parimal Kumar Jha and Vishal D Shah. Both chartered accountants have been barred from conducting audit work for 10 years and five years, respectively, while the firm faces a penalty of Rs 3 crore. Additionally, the two auditors have been directed to pay fines of Rs 1 crore and Rs 50 lakh.
The findings reveal that Pathak HD & Associates and its partners failed to meet the obligations of statutory auditors, breached provisions of the Companies Act, and violated ethical codes. They were deemed «grossly negligent» and failed to report «material mis-statements» in Reliance Capital's financial records, despite warnings from Price Waterhouse regarding potential fraud and
