Misconduct in audit of DHFL branches: NFRA bans 4 auditors for 1 year, imposes fine

Further, NFRA investigated K Varghese & Co (the Audit Firm), which was the "Statutory Branch Auditor" of 17 branches of DHFL for FY 2017-18, with Mathew Samuel, Sam Varghese, Harish Kumar T K and M Baskaran, as its partners in the firm for the audit of several branches of the housing finance company.

As per the order, NFRA's investigation revealed that the appointment of none of the 33 branch auditors was approved at the Annual General Meeting (AGM) of DHFL, as required by the Companies Act.

According to NFRA, the auditors also portrayed themselves as the "branch statutory auditor" in all communications with the DHFL and CAS, and issued an "Independent Branch Auditors' Report".

The auditors not only accepted a legally invalid appointment but also flouted the provisions of the Chartered Accountants Act (CAs Act), which requires ensuring a valid appointment as per the norms.

The regulator also investigated the auditors' compliance with the applicable Standards on Auditing (SAs) in the performance of the branch audit of DHFL.

It was revealed that the auditors had not complied with laws under Standards on Auditing, and had not maintained proper audit documentation, and displayed flawed understanding and interpretations of the various stipulations in the law and standards in an unprofessional manner that established their professional misconduct in the matter, NFRA said.