The National Financial Reporting Authority (NFRA) has imposed a penalty of Rs 2 crore on the statutory auditor and Rs 15 lakh on two chartered accountants for professional misconduct during the audit of Coffee Day Enterprises Limited (CDEL) for the financial year 2019-20. NFRA has also debarred the two CAs involved from undertaking any audit work for periods of 10 years and five years, respectively.
According to NFRA's order, the auditors failed to perform mandatory procedures and neglected their duty by not addressing the risk of material misstatement and fraud. The auditors, from Venkatesh & Co., began the audit before obtaining a no-objection certificate from the previous auditors, BSR & Associates, which violated the required protocols.
The case came to light when NFRA, after receiving a report from the SEBI, began investigating the diversion of Rs 3,535 crore from seven subsidiaries of CDEL to Mysore Amalgamated Coffee Estate Limited (MACEL). The report revealed that MACEL had served as a conduit for transferring funds to personal accounts linked to CDEL's late chairman, V.G. Siddhartha, and his associates.
NFRA's order underscores the critical importance of auditors adhering to their statutory obligations to protect the public interest. This follows a similar penalty levied in August on BSR & Associates LLP for lapses in their audit of CDEL.
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