RBI Bars Haribhakti & Co. From Auditing Entities Regulated By It For Two Years
The Reserve Bank of India has barred chartered accounting firm Haribhakti & Co. from taking up any type of audit assignments for entities regulated by it.
The bar comes into effect from April 1, 2022 and will remain in place for a period of two years, the RBI said in a statement on Tuesday. This will not impact audit assignments taken up by the firm in RBI-regulated entities for the financial year 2021-22, it said.
"This action has been taken on account of the failure on the part of the audit firm to comply with a specific direction issued by the RBI with respect to its statutory audit of a systemically important non-banking financial company," the regulator said in its statement.
According to a person familiar with the matter, the action has been taken in connection with audit assignments of Srei Group non-bank lenders. The RBI, last week, superseded the boards of Srei Infrastructure Finance Ltd. and Srei Equipment Finance Ltd. and referred the two companies for insolvency proceedings.
According to financial statements issued by Srei Infrastructure, Haribhakti and Co. were statutory auditors for the company between FY16 and FY20. According to the annual report for FY21, D. K. Chhajer & Co. were appointed statutory auditors at the annual general meeting in September 2020.
The RBI invoked powers under Section 45MAA of the RBI Act to take this action. This is the first time that the regulator has taken such an action against an audit firm, the person quoted above said.
"Where any auditor fails to comply with any direction given or order made by the (Reserve) Bank under section 45MA, the (Reserve) Bank, may, if satisfied, remove or debar the auditor from exercising the duties as auditor of any of the Bank regulated entities for a maximum period of three years, at a time," the section states.
Among the larger private banks, Axis Bank Ltd, IndusInd Bank Ltd and RBL Bank Ltd, have listed Haribhakti & Co. as statutory auditors, based on information in their annual reports for FY21. Apart from these three banks, the chartered accounting firm as served as auditor for Shriram Transport Finance Ltd and Centrum Capital.