ICAI reviews financial statements of Vijay Mallya group firms

Chartered accountants' apex body ICAI is reviewing financial statements of certain Vijay Mallya group firms to assess the role of auditors and has warned of strict disciplinary action in case of violations.

The move also comes against the backdrop of the embattled Mallya facing a case of loan default worth Rs 9,400 crore.

Warning of strict action against auditors in case of violations, the Institute of Chartered Accountants of India (ICAI) has said it is highly concerned about the issue and role of its members in "an unhealthy manner".

The Financial Reporting Review Board (FRRB) of ICAI is reviewing the financial statements of certain enterprises of the Mallya group to assess the performance of the auditors.

"In the case of the UB group, as a proactive measure, FRRB is selecting the general purpose financial statements of various enterprises of the UB group which were reported by the media to have been involved in irregularities," ICAI President M Devaraja Reddy said.

FRRB assesses whether the financial reporting framework has been duly complied with.

Among others, FRRB reviews the financial statements of various enterprises with a view to verifying various aspects such as compliance with the generally accepted accounting principle in the preparation and presentation of financial statement.

In the latest monthly message to members, Reddy has flagged concerns over bad loans and wilful defaulters.

"The problem may relate to management or judgement; non-retrieval of loan money will have direct inferences on the auditing profession as well," he said.

Noting that regulators and banks are striving hard to recover bad loans from wilful defaulters, he said, "ICAI is highly concerned about the issue and role of its auditors in an unhealthy manner."

In the context of FRRB reviewing the financial statements of certain Mallya group firms, Reddy said, "Auditors' role in this dilemma, which so far has not come to the fore, if found deficient, shall be dealt with strictly by the disciplinary committee of ICAI."

Multiple agencies, including the Enforcement Directorate and CBI, are probing issues related to the massive loan default by Mallya and others.

Emphasising that ICAI's regulatory mechanism is "working assiduously", he said it has been taking disciplinary action against members found guilty of alleged professional misconduct.

Action is initiated as per provisions of the Chartered Accountants (Amendment) Act, 2006, and related rules.

"ICAI has a strong disciplinary mechanism in place whereby proceedings are initiated and taken to their logical end through a well-defined procedure, which maintains the interests of natural justice while ensuring the guilty are never spared," Reddy said in the e-mailed statement.