Deloitte Haskins & Sells quits as auditor of cash-strapped DHFL

Deloitte Haskins & Sells, one of the joint auditors of the cash-strapped housing finance company DHFL, is believed to have put in its papers. In a communication to the Ministry of Corporate Affairs, the auditor has cited repeated failure on part of the company to provide them with sufficient explanation or information about certain unsecured borrowings. 

However, the other joint auditor, Mumbai-based Chaturvedi & Shah, continues to service the company, sources added.  

Earlier, both the joint auditors had noted in DHFL’s financial results for FY19 that there were irregularities in granting of certain loans and that they had reservations about management preparing the statement of accounts using a going concern basis of accounting. “We are unable to comment on the company’s compliance of the covenants in respect of all borrowings and consequential implications,” the auditors had said. 

Earlier, the auditors citing Section 143 (1) of the Companies Act had sought additional information from the company on certain transactions. 

DHFL management has held the allegations of irregularities are unfounded and malicious. The company is currently going through a plan to restructure its debt and inject fresh capital into the business through a stake sale.

When contacted, a DHFL spokesperson said they were not aware of the latest development. According to Companies law and Sebi-listing provisions, a company is supposed to inform the regulator any instance of resignation by the auditor.  

Deloitte’s move to resign from DHFL comes at a time when all the Big Four audit firms, and the credit rating agencies, are under the scanner for their role in the IL&FS crisis. In June, auditors of Reliance Capital and Reliance Home, too, had resigned from the companies. 

Markets regulator Sebi (Securities and Exchange Board of India) has recently proposed stricter disclosure norms for auditors of listed companies. 

In a consultation paper, Sebi proposed that if the auditor of a listed entity has signed the audit report for all the quarters of a financial year, except the last quarter, the auditor should finalise the audit report for the said financial year before such resignation. In all other cases, the auditor shall issue limited review/audit report for that quarter before such resignation.