The National Finance Reporting Authority (NFRA) has found a number of gaping holes in the audit of Infrastructure Leasing & Financial Services (IL&FS) for 2017-18. These include failure to comply with basic requirements of audit and violation of norms on quality control and auditor independence. The auditor was SRBC & Co. 

In its report released recently, the NFRA has also found lapses in the audit on loans and advances. 

The report observed that the initial appointment of SRBC & Co and the continuation of the firm as statutory auditor of IL&FS were violative of the norms of independence. This is because its network (Ernst & Young Global/EY ) provided prohibited services to the IL&FS Group and also had a business relationship with the auditee. SRBC, its partners and employees have been using the brand name, email domain, policy documents, etc of the EY. 

SRBC had also admitted that it is a part of the network of EY. Therefore, the report says, that there is no doubt that SRBC is a network firm of EYG. EYG entities have been earning significant non-audit revenues from IL&FS which is audited by one of its network firms – SRBC. Even SRBC too has directly earned non-audit revenue from IL&FS Group entities. The total non-audit fees of Rs 4.57 crore earned by EYG entities, including SRBC, from IL&FS and its group entities (for the relevant period of four years up to 2017-18) was much more than the audit fee of Rs 2.3 crore from IL&FS.