Resignations Of Auditors After Differences With Corporate Managements Likely To Trigger Investigations By RBI, SEBI

Banking regulator Reserve Bank of India (RBI) and capital markets regulator Securities and Exchange Board of India (SEBI) are likely to investigate certain transactions where bank loans were raised by promoters for a specific purpose but used for other purposes.

The recent spate of resignations by auditors after differing with company managements would be the immediate trigger for the likely probes.

Various probes by the Serious Fraud Investigation Office (SFIO) have revealed that the banking regulator could have done more before the Infrastructure Leasing and Financial Services (IL&FS) debt crisis hit the market.

In its charge sheet filed in a Mumbai court in the IL&FS Financial Services (IFIN) case, the

According to an SFIO charge sheet on the IL&FS case filed before a Mumbai court, timely intervention by the RBI could have detected the crisis earlier and stated that some of the issues were raised as late as during the 2017 quarterly RBI review.

It was reported earlier, that in a written statement to the SFIO, auditor BSR & Associates, the KPMG network firm, had written to the RBI seeking clarity about lending within the IL&FS Group about a month after its debt crisis shocked the market.

It may be recalled that recent regulatory action against Deloitte, EY and KPMG, has seen auditors de-risk themselves and even resigning over differences between auditors and managements.

Incidentally, auditors taking a stand have led to conflicts with the management, in cases like Reliance Capital, Manpasand, Vakrangee, Fortis Healthcare, IL&FS Transportation Networks Ltd (ITNL) as well as Jet Airways.