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Business News/ Companies / News/  Coffee Day audit lapses: NFRA slaps 1.10 cr fine, ban on 2 auditors, 1 audit firm
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Coffee Day audit lapses: NFRA slaps ₹1.10 cr fine, ban on 2 auditors, 1 audit firm

The National Financial Reporting Authority has imposed a ban and penalties totalling ₹1.10 cr on three entities, including two auditors, for alleged professional lapses in the auditing of Giri Vidhyuth (India), a subsidiary of Coffee Day Enterprises, for 2019-20.

The NFRA further said the auditors failed to comprehend that Giri Vidhyuth was a shell company used by promoters for financial manoeuvres (Photo: HT)Premium
The NFRA further said the auditors failed to comprehend that Giri Vidhyuth was a shell company used by promoters for financial manoeuvres (Photo: HT)

The National Financial Reporting Authority (NFRA) has imposed a ban and penalties totalling 1.10 crore on three entities, including two auditors, for alleged professional lapses in the auditing of Giri Vidhyuth (India) Ltd, a subsidiary of Coffee Day Enterprises Ltd, for 2019-20.

The case pertains to diversion of funds worth 3,535 crore from seven subsidiary companies of Coffee Day Enterprises to Mysore Amalgamated Coffee Estate Ltd (MACEL).

MACEL is a subsidiary of listed entity of Coffee Day Enterprises, owned and controlled by the promoters of CDEL.

After markets regulator Sebi shared its investigation report in April 2022, audit regulator NFRA started probing the professional conduct of the statutory auditors of GVIL.

Separately, the audit regulator has imposed a fine of 1 crore on audit firm Sundaresha & Associates. The NFRA also slapped a two-year ban on the audit firm.

The NFRA further clarified that the ban period of Sundaresha will start after the completion of two years of debarment period imposed already imposed by the audit regulator through its order in April in the case of Tanglin Developments Ltd, a CDEL subsidiary, for the audit of FY 2018-19.

The NFRA also levied a penalty of 5 lakh each on statutory auditors C Ramesh and Chaitanya G Deshpande, and barred them from taking up auditing work for a period of five years.

The audit regulator said all of them have been prohibited from undertaking any audit in respect of financial statements or internal audit of any company or body corporate during the ban period.

The NFRA said, the probe revealed that the statutory auditors (Sundaresha, C Ramesh and Deshpande) of GVIL for FY 2019-20, failed to report the misstatement of 325 crore in cash flow statement. The total misstatements in the financial statements of GVIL were of 1,776.16 crore, the audit regulator added.

The audit regulator said the auditors did not exercise professional judgement and scepticism during audit of 581.16 crore borrowed from subsidiary companies of CDEL. Loans of 370 crore and 105 crore were fraudulently given to MACEL and a related party SICAL Logistics Ltd, the regulator said.

The regulator noted that the auditors failed to perform sufficient appropriate audit procedures while auditing related party balances, thus failing to detect and report understatement of related party loans by 350 crore.

The NFRA further said the auditors failed to comprehend that Giri Vidhyuth was a shell company used by promoters for financial manoeuvres.

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Published: 31 May 2023, 07:55 PM IST
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