NFRA Bars CA Rajiv Bengali For Five Years
NFRA also fines Rajiv Bengali Rs 5 lakh for professional misconduct in audit of Trilogic Digital Media Ltd.
The National Financial Reporting Authority on Monday barred chartered accountant Rajiv Bengali from being appointed as an auditor or internal auditor of any entity for five years. This is in addition to the Rs 5 lakh penalty imposed on him. These sanctions were imposed for professional misconduct as an engagement partner for the audit of Trilogic Digital Media Ltd.
An initial investigation by the authorities found Trilogic Digital in non-compliance with various accounting and auditing standards as required under the law. There were misstatements in the presentation of the financial statements of the company, the authority said.
Despite the deficiencies, Bengali gave the company a clean chit for which he was issued a show-cause notice in July, seeking reasons for the lapses. The authority, unsatisfied with the reply, after perusing all material documents, found Bengali guilty of multiple violations.
He was found guilty of false reporting of a cash flow statement in the auditor’s report. According to the authority, the cash flow statement, which was initially absent from the audit file, suspiciously appeared in the reply to the show cause notice, which the authority felt gave the impression that it had been made subsequently.
The authority also noted that false reporting was also made about the compliance of various accounting standards. The auditor failed to identify misstatements in writing off sundry balances and miscellaneous expenses which was 3,041% higher than the previous year. Also, he failed to maintain documents that he was statutorily obliged to maintain citing computer system issues, which is unacceptable according to the authority. Other material misstatements as to related party transactions were also made.
Deferred tax assets to the tune of Rs 11 crore were recognised by Trilogic Digital despite no certainty of future taxable income.
The auditor has admitted to his lapse in ascertaining the authority empowered to sign financial statements under The Companies Act. The financial statements of the company were not signed by the board of directors as required by law.
Improper classification of assets and liabilities, failure to report the method of depreciation, and failure to disclose employee benefits on retirement are some of the other charges proved against him.
Rajiv Bengali by not exercising his professional due diligence committed professional misconduct, said NFRA, adding, that there were substantial deficiencies in the audit, abdication of responsibility, and inappropriate conclusions.