The Institute of Chartered Accountants of India (ICAI) has formed a ‘prima facie’ opinion in the complaint against the auditor of National Spot Exchange (NSEL) at the time of the latter’s payments scam.
The institute said in a reply to a query under the Right to Information law) that its director (discipline) had formed the view and this had been sent to the (internal) ‘competent authority’. The decision of the latter is to be reported in due course, it added. The reply did not indicate whether the said view confirmed the alleged misconduct or not.
ICAI has been probing complaints against Mukesh P Shah & Co, the entity which audited NSEL in the run-up to its collapse, following a Rs 5,600 crore payment crisis in July 2013. The first complaint was in September 2013 by one Uday Punj, followed by two more by investors. All these were combined. The auditor responded to these allegations in November 2013. After waiting for several months, the complainants moved the high court here, earlier this year, seeking directions for a quicker response from ICAI.
In May, the latter had assured action within four weeks before the court. In July, as there was no further response, Noida-based IGL Finance, one of the original complainants, filed a query under RTI. ICAI gave a detailed response to this last week.
On why the timelines agreed before the court was not adhered to, ICAI said the prima ficie opinion earlier referred to was pending for a decision and “No such time limit” was prescribed in the Chartered Accountants (Procedure of investigation of professional and other misconduct and conduct of cases) Rules, 2007. Each complaint is processed and decided on the facts, it said.
The complainants have alleged several irregularities in the audit process of NSEL. They said they were misled by the auditor's report, which had said that “the audit procedures (were) performed for the purpose of reporting the true and fair view of the financial statements and according to the information and explanations given to us by the management, we report no fraud on or by the company has been noticed or reported during the course of our audit”.
NSEL had defaulted in payment to its investors. The goods supposedly held in its inventory to back the trades in question were not physically available “and it has resulted in fraud done by the company and gross negligence on the part of the auditor”, goes one charge.