The NFRA penalizes and bans Cafe Coffee Day auditors

National Financial Reporting Authority (NFRA) has taken stern action against two auditors and the audit firm of Cafe Coffee Day Global for “professional misconduct” and failing to report irregularities in the company’s books in 2019–20.

While chartered accountant Madhusudan UA has been given a five-year practice restriction and must pay a penalty of Rs 5 lakh, chartered accountant A S Sundaresha has been given the maximum penalty of Rs 10 lakh and is prohibited from practicing for ten years. In a 44-page order published on Friday, the NFRA stated that the audit company, ASRMP & Co, had also received a Rs 2-crore fine and a four-year ban.

“Despite the fact that the fraud was discovered after group chairman V G Siddhartha committed suicide and reports of investigations by Ashok Kumar Malhotra, retired DIG of the CBI, the auditors showed no professional skepticism and due diligence. The total amount of material and pervasive misstatements was Rs 1,615 crore, which the auditors failed to discover and record in their independent audit report, it added. The auditors also failed to acquire enough suitable audit evidence, it added.

Adding and changing documents in their audit files, which amounted to tampering, was an attempt to deceive the agency, according to the regulator for auditors and audit firms dealing with large, publicly traded corporations. Additionally, they broke the Institute of Chartered Accountants of India’s code of ethics by accepting audit and non-audit work from numerous Coffee Day companies and their promoters, which constituted a conflict of interest. The professional fees received from these entities made up more than 40% of the total fees, and this violates the code of ethics.