New Delhi: The board of IL&FS Transportation Networks Ltd (ITNL), a subsidiary of beleaguered infrastructure financier IL&FS, has accepted the resignation of its statutory auditor SRBC & Co LLP.
The SRBC tendered its resignation from all assignments of ITNL . Audit regulator (NFRA) found several audit failures on the part of the auditor on ITNL.
“We wish to inform that at the audit committee meeting held on October 4, 2021, SRBC & Co LLP, statutory auditors, has expressed their intention to resign as auditors of the company. The audit committee had recommended the proposal of SRBC to the board of directors. At the meeting, the board of directors approved the proposal for resignation of SRBC.”
Nonetheless, The NFRA had raised fresh doubts over the ability of statutory auditors. If they presented true facts about the accounts of ITNL.
Therefore, in its report, the NFRA termed initial appointment of SRBC & Co LLP, and its continuation as statutory auditor of ITNL as illegal and void. It also questioned the audit firm’s failure to appropriately and sufficiently evaluate the use of the going concern and miss 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. This is the year when the board of IL&FS was superseded by the government. New management under Uday Kotak took charge to correct the mishandling of the group and resolve debt running over Rs 90,000 crore.
However, ITNL did not value its financial exposure properly.
The company understated its losses during 2017-18 by at least Rs 2,021 crore. It gave an unjustified reversal of ECL on loans to the SPV and on trade receivables. Also, due to incorrect impairment valuation. This excludes the impact due to incorrect treatment of the letter of comforts amounting to Rs 2,654 crore.