The Ministry of Corporate Affairs is ready to strike against Deloitte Haskins and Sells in the murky IL&FS case. IANS learns that MCA has taken an aggressive view over malpractices by Deloitte over the last decade which have led to papering over the large cracks in its finances. Misrepresentation, cooking of books by auditors and malafide practices with respect to the web of subsidiaries are at the kernel of Deloitte's architecture for IL&FS for which MCA will disbar them.
On Wednesday, Serious Fraud Investigation Office (SFIO) questioned Deloitte's former Chief Executive Officer Udayan Sen and two others over alleged audit lapses in the books of IL&FS.
The white collar crime probe agency had recently received a communique from a Deloitte Haskins and Sells whistle-blower, raising several audit shortcomings in the company's books.
The letter alleged that the audit firm had recommended a complex structure to the infrastructure company and that it received a hefty fee from IL&FS. The Ravi Parthasarthy-led closed user group, which ran like a secret society controlled the company's narrative for 30 years in a completely unprofessional and opaque manner. Deloitte was part of this cosy club arrangement benefiting immensely.
The whistle-blower exposing a can of worms wrote that -- the senior leadership team at Deloitte was very much aware of the factual situation on the financial mismanagement and impropriety of the IL&FS Group. Deloitte has audited the group over a period of the last 10 years and has been an integral part of the group's unmitigated growth benefiting in several ways in terms of being a preferred advisor role as well as favouring Deloitte by awarding several advisory works on a single-sourced basis with substantially high fees as a compensation for such mutual benefiting arrangements.
The whistle blower has even mentioned the modus operandi of how the auditor's position was protected:
*Whenever there were dubious findings in course of the audit engagement, Deloitte agreed to rely on management explanations and comfort letters by compromising on its independent opinion.
*In cases where there were audit positions to be taken which were not in a favourable light for the group, the top management would meet and coerce the Deloitte partners for a more favourable position or a watered down position.
*Internally, several views in the matters of audit opinion were watered down by the Deloitte leadership in the first instance. Over the years, this has led the entire audit susceptible to legacy position and compounded the financial misreporting.
*In many cases, the language of the management response was agreed before hand by Deloitte to close its internal views.
*Financially the Group provided additional fees as consultancy services for mutual benefit.
This scathing indictment by the whistle-blower which clearly states that large sums of money changed hands for maintaining silence forced SFIO to conduct a marathon interrogation of Udayan Sen and two others.
The whistle-blower points out to a quid pro quo between IL&FS Group and Deloitte audit partner Udayan Sen who deliberately overlooked flawed facts. He avers that several crores worth of engagements were given to the consulting division of Deloitte under the guise of Strategy Study for Diversification. He names Udayan Sen and consulting partner Sanjoy Datta, who both overlooked round tripping of loans on a regular basis. He signs off by saying the extent of the scam is mind boggling as the nexus of professionals and consultants is devious.
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