NFRA bans Coffee Day auditors, slaps penalty

NEW DELHI: The National Financial Reporting Authority (NFRA) has taken stern action against two auditors and the audit firm of Coffee Day Global for “professional misconduct” and failure to report irregularities in the company’s books in 2019-20, despite having access to the details of an investigation that was ordered following the death of the company’s chairman VG Siddhartha.

While chartered accountant A S Sundaresha has been slapped with the maximum permissible penalty of Rs 10 lakh and barred from practicing for 10 years, his colleague, Madhusudan U A, has received a five-year ban on practicing and has to pay a penalty of Rs 5 lakh. The audit firm, ASRMP & Co, has also been handed a Rs 2-crore penalty and banned for four years, which will run concurrently with the debarment in the case related to 2018-19, NFRA said in a 44-page order issued on Friday.
“Despite the fraud being revealed after the suicide of group chairman V G Siddhartha, and the reports of investigations by Ashok Kumar Malhotra, retired DIG of CBI, the auditors displayed no professional scepticism and due diligence. The auditors also failed to obtain sufficient appropriate audit evidence… the total material and pervasive misstatements amounted to Rs 1,615 crore, which the auditors did not identify and report in their independent audit report,” it said.

The regulator for auditors and audit firms dealing with listed and large companies also said there was an attempt to mislead the agency by “adding and altering documents in their audit files, which amounted to tampering”. Besides, they have violated the code of ethics issued by the Institute of Chartered Accountants of India as they had audit and non-audit work from a large number of Coffee Day companies and the promoters, which amounts to conflict of interest and the professional fees received from these entities were over 40% of the total fees.