{"id":306275,"date":"2023-11-03T12:00:58","date_gmt":"2023-11-03T06:30:58","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=306275"},"modified":"2023-11-03T12:09:15","modified_gmt":"2023-11-03T06:39:15","slug":"nfra-imposes-monetray-penalty-debarrment-auditors-lexus-granito-india-ltd-finance-corporate-legal-news","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2023\/11\/03\/nfra-imposes-monetray-penalty-debarrment-auditors-lexus-granito-india-ltd-finance-corporate-legal-news\/","title":{"rendered":"NFRA imposes monetary penalty on Statutory Auditor and Engagement Partner of Lexus Granito India Ltd. in view of their professional misconduct"},"content":{"rendered":"
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National Financial Regulatory Authority (NFRA):<\/span> While disposing of the show cause notice (SCN) issued to Ashok Holani and Co. (for FY 2018-19 and 2019-20) and CA Rahul Jangir (for FY 2017-18 and 2019-20), who were appointed as auditors of Morbi based Lexus Granito India Ltd. (LGIL), the Bench of Dr Ajay Bhushan Prasad Pandey (Chairperson) and Praveen Kumar Tiwari and Smita Jhingran (Full-time Members) in view of the professional misconducts committed by the auditors, imposed a monetary penalty of Rs 10 Lakhs on Ashok Holani and Co. and Rs 5 Lakhs on CA Rahul Jangir in addition to debarring him for 3 years from being appointed as an auditor and internal auditor in respect of financial statements for any company or body corporate.<\/p>\n

The Authority observed that it is the duty of the auditor to conduct audit with professional skepticism and due diligence and report their opinions in an unbiased manner.<\/p>\n

LGIL is a Small Medium Enterprise (SME) dealing in trading of tiles. LGIL prepared its financial statements in accordance with Accounting Standards Framework as it was not mandatory for LGIL to adopt to the Indian Accounting Standard Framework.<\/p>\n

Ashok Holani and Co. were appointed as the statutory auditor for the first time in the FY 2017-18 and Rahul Jangir was appointed as Engagement Partner for the statutory audit.<\/p>\n

NFRA took up suo motu investigation into the role of the statutory auditors for LGIL under Section 132(4)<\/a> of the Companies Act, 2013<\/a> after receiving a letter from SEBI in 2021, pointing out the discrepancies of financial statements of LGIL due to improper writing-back of liabilities and reliance of the auditors on management for valuation of inventory and utilisation of IPO proceeds.<\/p>\n

On examination of the audit files, it was observed that audit was prima facie conducted disregarding the relevant requisites provided in the Companies Act. Despite this the Engagement Partner had issued an unmodified audit opinion in the Independent Auditor’s Report on behalf of the firm.<\/p>\n

On being satisfied with the existence of a sufficient cause to take action, a SCN was issued to the auditors and they were charged with professional misconduct for:<\/p>\n