NFRA imposes Rs 20 lakh penalty on CA for professional misconduct

The National Financial Regulatory Authority (NFRA) has slapped a penalty of Rs 20 lakh and a ten-year debarment on a chartered accountant for professional misconduct, failure to exercise due diligence, and gross negligence in the Statutory Audit of Seya Industries Limited on Tuesday. In another matter, NFRA imposed a penalty of Rs three lakhs on another CA and debarred him for three years for professional misconduct in the audit of SRS Infrastructure.

NFRA had recently imposed a penalty of Rs 50 lakh on a CA for professional misconduct which led to business service provider Quess Corp claiming undue income tax deduction of almost Rs 971 crore over three years.

NFRA took up a suo motu investigation into the role of the statutory auditors of Seya Industries Limited after receipt of a letter dated March 28, 2023, from SEBI about non-compliance with the accounting standards and misreporting in the financial statements by the company, and non-cooperation by the auditor.

SEBI had observed that the company had inflated its purchase and sales in the FYs 2018-19 to 2020-21, did not disclose related party relationships and their transactions, and siphoned off funds through undisclosed related parties, NFRA said. SEBI also noted that the company did not provide for interest costs on NPA loan.

Pointing out the lapses in the audit of SRS Infrastructure, NFRA said that the auditor failed to evaluate management’s assessment of the entity’s ability to continue as a going concern and also to obtain appropriate evidence related to revenue recognition.