Deloitte In News Again: Deloitte is once again in the news. The reason again is negative. Deloitte Haskins & Sells LLP has been fined Rs 2 crore for alleged professional indiscipline regarding the audit of Zee Entertainment Enterprises (ZEEL). This fine has been imposed by the National Financial Reporting Authority i.e. NFRA. Besides, fine and ban have also been imposed on two chartered accountants. Chartered Accountant AB Jani has been banned from doing any audit work for five years along with a fine of Rs 10 lakh in the case related to the audit of financial years 2018-19 and 2019-20. A fine of Rs 5 lakh and a ban of three years has been imposed on Rakesh Sharma. However, this is not the first time that Deloitte has been fined. Action has been taken against him not only in India but all over the world.
What is the matter?
The National Financial Reporting Authority, taking suo motu cognizance, had examined the audit file of Zee Entertainment Enterprises Limited (ZEEL) for a stipulated period. Its purpose was to assess whether the auditors had committed any professional misconduct. NFRA, after examining the audit file and the audit company’s responses to queries as well as other records, said that prima facie the auditors did not comply with their professional duties under the Companies Act as well as the Standards on Auditing (SA). . NFRA, in its 30-page order on December 23, said the auditors failed to meet standards and violated the Act in respect of some significant related party transactions.
What was wrong?
The promoters of Essel Group of Companies along with the chairman of Zee Entertainment Enterprises issued a letter to Yes Bank in September 2018. In this, the promoter group company Essel Green Mobility Ltd. Zee Entertainment Enterprises had committed a fixed deposit amount of Rs 200 crore as a guarantee for the loan of Yes Bank. The bank encashed fixed deposits in July, 2019 to settle loan amounts due to seven promoter group companies. NFRA said encashment of fixed deposits and its maintenance is not subject to approval from the board of directors or shareholders of the bank. Was taken. The statutory auditors failed to identify and report this.
CEO was also fined
In July 2020, NFRA had banned former Deloitte India CEO Udayan Sen from carrying out any kind of auditing activity for 7 years. Along with this, he was also asked to pay a fine of Rs 25 lakh. This action by NFRA was taken regarding their role in the audit of scam-hit IL&FS Financial Services (IFIN).
Action taken abroad also
Action has been taken against Deloitte not only in India but also abroad. In Britain, audit firm Deloitte was fined a record £15 million for failings in the audit of software company Autonomy between January 2009 and June 2011. Richard Knights and Nigel Mercer, two former Deloitte partners involved in the audit, were also fined by the Financial Reporting Council (FRC). Similarly, the Beijing office of Deloitte Touche Tohmatsu was fined US$30.8 million in 2023 for failing to adequately audit a Chinese-owned asset management company. The former head of an asset management company was sentenced to death on corruption charges. In Malaysia also, action was taken against Deloitte in 2021. Deloitte PLT had settled with the government by paying 80 million dollars regarding the 1 MDB scandal in Malaysia.
Stuck in America and South Africa too
In 2018, Deloitte & Touche LLP paid $149.5 million to the United States to resolve potential False Claims Act liability arising from Deloitte’s role as the independent external auditor of Taylor, Bean & Whittaker Mortgage Corp. (TBW). Paid. In South Africa too, this company had to pay Rs 260 million in its currency as a settlement due to audit related irregularities from Tongaat Hulett. Similarly, in Nigeria too, a major fraud was found in the audit of Deloitte.
Working culture is also bad
Deloitte is not only infamous in matters of audit. In fact, its work culture is also toxic. In Australia alone, there were 144 cases of ethics violations during 2024. This also includes cases of bullying and harassment. Such cases also occurred in Britain. Constant questions being raised on Deloitte’s audit, increasing legal action against it and questions being raised on the ethics within the company have forced its clients to think whether they are working with a professional company?
