HDIL’s Auditors May Be Probed As Part Of Investigations Into Punjab & Maharashtra Co-Operative Bank Ltd Fraud

Mumbai-based chartered accountant firm Rajeswari & Associates which was Housing Development & Infrastructure Ltd (HDIL) auditor is likely to be probed by the Mumbai police’s Economic Offenses Wing (EOW) as part of its probe into the Rs 4,355.43 crore Punjab & Maharashtra Co-operative (PMC) Bank Ltd fraud.

The auditor’s findings in their financial reports will also be scrutinized as part of the investigations.

In May 2018, the auditor had stated while submitting its audit report for fiscal 2018, that one of HDIL’s units Guruashish Construction Pvt Ltd was referred to a bankruptcy court by its lenders.

The auditor had mentioned in its audit report that because of HDIL subsidiary Guruashish being referred to a bankruptcy court, its ability to continue as a going concern is dependent on the company performance in terms of the resolution plan to be approved by the National Company Law Tribunal (NCLT).

The auditor had also expressed it inability to express any opinion about the extent of repayment of the debt of the company, due to the large debt of HDIL.

“The consequential effect of the above, on the consolidated financial results for the period ended 31 March 2018 is not ascertainable," the auditor had observed in its audit report.

According to the auditor’s report for fiscal 2018, HDIL’s fixed deposits (with less than a year maturity) included Rs 10.88 crore pledged with a bank as security for guarantees and Rs 79.42 crore pledged with another bank as security for overdraft.

Incidentally, an auditor’s job is to ensure that a company’s financial are not violated and all accounting principles are adhered to.

An auditor validates the company’s financial statements and submits these to shareholders as well as the board in order to make them aware of any risks or lapses, based on the disclosures made by the company.