NFRA Debars Auditor for Not Issuing “Adverse Opinion” on CFS for Non-consolidation of Material Subsidiary

On receipt of information from the Securities and Exchange Board of India (SEBI) regarding financial irregularities committed by a company, NFRA initiated an investigation against the auditor of a Mumbai-based company in pursuance of section 132(4) of the Act. NFRA instructed the statutory auditor to submit the Audit File and other relevant information related to the audit of the company for investigation into professional or other misconduct of the statutory auditor.

The authority after analysing the various audit documents and contentions made by the auditor passed the order on 23.11.2023. The Engagement partner has Qualified’ his opinion on Consolidated Financial Statements (CFS) stating that the Financial Statements reflected ‘true and fair view’ except for the effect of non-consolidation of a wholly-owned subsidiary which constituted about 19.20% and 28.96 % respectively of the assets and liabilities of the Parent Company. NFRA holds the view that this being a material subsidiary, the auditor should have issued a material subsidiary. To know the intentions of the Engagement Partner behind issuing a Qualified Opinion on such an important matter and more observations from the order.

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