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Ministry of Corporate Affairs Likely To Ban Deloitte after Alleged Malpractice In IL&FS Accounts
India’s Ministry of Corporate Affairs is likely to invoke Section 140 (5) of the Companies Act to debar accounting and auditing firm Deloitte Haskins & Sells, after alleged malpractice in IL&FS accounts.Section 140 (5) essentially enables the government to direct a company to change its auditors if it is satisfied that the auditor of a company has, whether directly or indirectly, acted in...
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India’s Ministry of Corporate Affairs is likely to invoke Section 140 (5) of the Companies Act to debar accounting and auditing firm Deloitte Haskins & Sells, after alleged malpractice in IL&FS accounts.
Section 140 (5) essentially enables the government to direct a company to change its auditors if it is satisfied that the auditor of a company has, whether directly or indirectly, acted in a fraudulent manner or abetted or colluded in any fraud by, or in relation to, the company or its directors or officers.
If the firm gets debarred, it would be the second such instance after Price Waterhouse (PW) was nailed in the Satyam scam.
In January, 2018, nine years after the Satyam scandal stunned corporate India, Securities Exchange Board of India (SEBI) banned Price Waterhouse from providing audit services to listed companies and market intermediaries for two years. Two Price Waterhouse partners were banned for three years.
The regulator also imposed a disgorgement of Rs 130.9 million on Price Waterhouse, and two of its chartered accountants, namely S Gopalakrishnan and Srinivas Talluri. These entities were charged under SEBI prohibition of Fraudulent and Unfair Trade Practices (FUTP) regulation.
Meanwhile, in a related development, the Bar Council of Delhi has directed the four big accounting firms—KPMG, Price Water House, Ernst & Young as well as Deloitte India, to not practice law until further orders.
The direction was made after Lalit Bhasin, President of the Society of Indian Law Firms, stated in a complaint that the above mentioned firms are actually accounting firms, which are engaged practicing law.
Notices were served to the Managing Partner of KPMG, Price Waterhouse Chairman Deepak Kapoor, Ernst & Young’s Regional Managing Partner Rajiv Memani and Deloitte India’s Managing Director.
“The Council is of the view that, in the meantime, all the firms be directed to give the list of all advocates, who have been engaged by them, in any capacity, in any of their offices, at any place," the Bar Council of Delhi notice read.
Incidentally, the matter has been adjourned for July 12, 2019.