Audit lapses at Coffee Day Enterprises: NFRA fines M/s BSR & Associates Rs 10 crore

India’s audit watchdog, the National Financial Reporting Authority (NFRA), has imposed a fine of ₹10 crore on M/s BSR & Associates LLP, a subsidiary of KPMG. This is the largest penalty ever levied by NFRA, resulting from significant errors in their audit of Coffee Day Enterprises Ltd. (CDEL) for the financial year 2018-19.

Aravind Maiya and Amit Somani, two auditors, have also been prohibited by the NFRA from performing audit work for a period of 10 and five years, respectively. Furthermore, Somani is facing a sentence of Rs 25 lakh, and Maiya has been fined Rs 50 lakh.

The Securities and Exchange Board of India (SEBI), the capital market regulator, conducted a thorough inquiry that led to the discovery of a substantial diversion of Rs 3,535 crore from seven Coffee Day subsidiaries to a firm under the promoters’ control.

In the 2018–19 Coffee Day audit, Maiya, the engagement partner, was instrumental in the process, while Somani, the engagement quality control reviewer, was in charge of managing it.

The audit watchdog reveals serious shortcomings in their audit procedures, such as their refusal to disclose the illicit transfer of cash even though there was enough proof of it. The auditors faced criticism for releasing an audit report that was both false and unaltered, indicating a grave violation of ethical norms, quality control standards, and auditing standards.