NFRA penalises auditor for lapses in Sobha audit case

New Delhi, Oct 19, 2023

The National Financial Reporting Authority (NFRA) has slapped a penalty of Rs 5 lakh on an auditor for professional misconduct and other lapses in the audit of Sobha Ltd for 2017-18 and 2018-19. In its order passed on September 29, the regulator imposed a fine of Rs 5 lakh on Supreet Sachdev, partner of BSR & Co LLP.

The order came after NFRA received information from the Securities and Exchange Board of India (Sebi) vide a letter dated May 2021 against Sachdev for professional and other misconduct in the statutory audit of Sobha for FY 2017-18 and 2018-19.

Thereafter, the regulator initiated action against Sachdev.

In its investigation, NFRA found that the auditor did not comply with the provisions of standards on auditing (SA) as he failed to report on the uncertainty about the recovery of unsecured land advances amounting to Rs 1,843.13 crore, with no marketable title to the land and some of which also is under litigation.

The auditor (Sachdev) also failed to report the matter even after identifying the weakness in the internal controls over the advances for which no ageing schedule was maintained, no monitoring was carried out and no confirmations were obtained by the firm, NFRA said in the order.

It had also not reported non-provisioning against the amount due from certain individuals and the security deposits given to certain other individuals and did not obtain sufficient appropriate audit evidence in respect of these transactions, even though the auditor was aware that the transactions were being enquired into by Sebi, as per the order.

Further, Sachdev did not comment, in its Independent Auditor's Report for FY19, on the issues raised by Sebi either through qualification or through Emphasis of Matter, it added.

[ET Realty]