Top audit firms concerned after hefty penalty on BSR & Associates
audit affiliates of top professional services firms after the regulator fined BSR & Associates LLP, a KPMG affiliate, ₹10 crore and banned two of its auditors for alleged lapses in audit of Coffee Day Enterprises (CDEL) where the audit firm had relied on subsidiary auditors while preparing consolidated audit reports.
All audit firms have multiple audits where the firms rely on subsidiary auditors' work when preparing consolidated audit reports for parent companies.
In the CDEL case, BSR & Associates had relied on the work of auditors of its subsidiaries while auditing the parent company.
The National Financial Reporting Authority (NFRA) claimed that the auditors «put on their blinkers» and, when questioned, tried to justify their actions by citing Standard on Auditing 600, which allows reliance on the work of subsidiary auditors.
This was despite CDEL's investments in these subsidiaries amounting to ₹1,937 crore, making up 89% of the standalone balance sheet.
In July last year, the regulator had fined and barred ASRMP & Co and AS Sundaresha for lapses in the audits of Coffee Day Enterprises' subsidiaries.
The auditing standard in question, SA 600, outlines the principal auditor's responsibility when relying on the work of other auditors.
«The SA 600 audit standard differs from global standards,» an audit partner at a top professional services company said on condition of anonymity. «In India, auditors are permitted to rely on the work of other auditors, unlike in global standards. This raises a critical
