New Delhi, Oct 11 | The board of beleaguered infrastructure financier IL&FS has approved the appointment of CNK & Associates LLP as the statutory auditor in casual vacancy for FY 2020-21.
Its appointment as official auditor of the company for FY22 was confirmed by the IL&FS board post the resignation of SRBC & Co LLP, which resulted in immediate casual vacancy in the office of the auditor.
The board of directors of the company at its meeting held on October 9 considered and approved the appointment of CNK & Associates LLP as the statutory auditor.
“In view of the above, the company would seek the requisite approval for CNK & Associates LLP to act as the auditor for the term starting from FY2020-21,” IL&FS shared in its letter to BSE, informing the bourse of the development.
SRBC tendered its resignation from all assignments of IL&FS Transportation Networks Ltd (ITNL) after audit regulator National Financial Reporting Authority (NFRA) found several audit failures on the part of the auditor for its work on crisis-ridden ITNL.
In its audit quality review (AQR) report of the statutory audit of ITNL, NFRA had raised fresh doubts over the ability of statutory auditors in presenting true facts about the accounts of ITNL.
In its report, the NFRA not only termed initial appointment of SRBC & Co LLP and its continuation as statutory auditor of ITNL as illegal and void, but it also questioned the audit firm’s failure to appropriately and sufficiently evaluate the use of the going concern basis of accounting by the management and thus missing out on registering the implications thereof in the auditor’s report.
The NFRA audit quality review for ITNL came for the period of 2017-18. That was the year when the board of IL&FS was superseded by the government and a new management under Uday Kotak was put in place to correct the mishandling of the group and resolve the debt running over Rs 90,000 crore.
In its letter to BSE, IL&FS said that in view of the affidavit filed by the MCA on December 4, 2020 with the National Company Law Tribunal (Mumbai bench), preparation of financial statements for the year ended March 31, 2021 is dependent on the completion of the restatements of accounts as directed by the NCLT.
In view of the pending restatements, SRBC, the statutory auditor, was not able to commence audit for FY 2020-21. Details of the said affidavit were filed with the exchange on February 25, 2021.
The resignation from SRBC has thus resulted in the unique situation for the company to appoint an auditor in casual vacancy for FY 2020-21 as well, after the completion of the said year, the letter mentioned.