Sebi disposes of proceedings against Fortis Healthcare's statutory auditor

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Markets regulator Sebi has disposed of proceedings against statutory auditor of Fortis Healthcare in a matter pertaining to its alleged role in diversion of funds.

It was alleged against Rashim Tandon, partner, Deloitte Haskins and Sells LLP, the statutory auditor of Fortis Healthcare Ltd (FHL), that it had indirectly aided in misrepresentation and non-disclosure of material information in consolidated financials of FHL.

An investigation was initiated in the matter of Fortis after an article published in February 2018 said promoters of FHL have taken at least Rs 500 crore out of FHL.

Sebi had initiated investigation into the matter of grant of inter-corporate deposits (ICD) to three borrower companies.

A forensic auditor was appointed to examine the alleged diversion of funds from FHL / its subsidiaries for the benefit of promoter or promoter connected entities.

It was prima facie observed that Deloitte Haskins and Sells LLP were the statutory auditors of the company during the period when misrepresentation of financial statements of 2016-17 and first quarter of 2017-18 took place and being signatory to the financial statements, it failed to comply with code of ethics and conduct the audit in accordance with the auditing standards.

However, Sebi found that at the time when the statutory auditor had started the auditing, there was no reason for an auditor to be alarmed with respect to the issue of the ICDs since the same were being already provided over a long period of time as a regular business practice of FHL and its wholly-owned subsidiary and there was no default in regular repayment of them.

The investigation of Sebi does not allege or establish that the auditor was even aware of the fraudulent scheme.

"On the contrary, it is observed from the investigation of Sebi that the Noticee had refused to sign unqualified unaudited financial information of FHL Group (which included FHsL) pending clarity on recoverability of the ICDs, which were not repaid as contracted on September 30, 2017," it added.

FHsL here refers to Fortis Healthcare Ltd (FHL) and Fortis Hospitals Ltd.

The auditor's conduct do not indicate any mala fide and Sebi concluded that the charges levelled against the entity cannot be sustained and thus disposed of the adjudication proceedings.