NFRA penalises the auditor with a Rs. 5 lakh fine and a 5-year suspension
Rakesh Puri was fined Rs 5 lakh and given a five-year suspension by the National Financial Reporting Authority (NFRA) on Friday for suspected professional misconduct in connection with the audit of Sun and Shine Worldwide Ltd (SSWL) for the financial years 2012–2013 and 2013–2014. SSWL, currently renamed as Johnson Pharmacare Ltd, is a firm that is listed on the BSE and engaged in commodities futures trading throughout the period under audit that the regulator evaluated.
Rakesh Puri, a partner at Y.D. & Company and auditor, was fined Rs 5 lakh by NFRA in its order.
Additionally, Puri has been forbidden for a period of five years from conducting any internal audit of the operations and activities of any corporation or other legal entity during the ban period, or any audit of financial statements.
The regulator learned through Sebi that the financial statements of SSWL for the years 2012–2013 and 2013–2014 overstated sales and purchase statistics by a total of Rs 1,417 crore.
As a result, NFRA opened an investigation into Puri’s professional misconduct during the audit of SSWL.
The auditor who had conducted the statutory audit of the company for five years, from 2010–11 to 2014–15, was requested to provide the audit files.
The regulator discovered that SSWL’s financial statements were substantially misstatements, and that the company’s reported revenue sharply increased (1,026%) from Rs 159.07 crore in FY 2012–13 to Rs 1,791.01 crore in FY 2013–14.
Additionally, the accompanying “expenses,” or the acquisition of derivative contracts, in the profit and loss statement were also impacted by this inaccurate accounting and misleading presentation, creating a false and exaggerated perception of SSWL’s operational scope.
In the order, the NFRA stated that the auditor’s gross negligence to the standards of auditing and failure to question the management on such erroneous reporting led to the auditor’s failure to perform audit procedures to identify these accounting manipulations, which resulted in the auditor giving a false impression to SSWL’s investors and stakeholders.
For violating the Securities Contracts (Regulations) Act, Sebi issued an order in September 2021 that fined SSWL and its directors and prohibited them from participating in the securities markets.
