SEBI junks proceedings against Fortis statutory auditor for alleged role in fund diversion

It was prima facie observed that Deloitte Haskins and Sells LLP were the statutory auditors of the company during the period when the misrepresentation of financial statements of 2016-17 and first quarter of 2017-18 took place and being a signatory to the financial statements, it failed to comply with code of ethics and conduct the audit in accordance with the auditing standards.

However, Sebi found that at the time when the statutory auditor had started the auditing, there was no reason for an auditor to be alarmed with respect to the issue of the ICDs since the same were being already provided over a long period of time as a regular business practice of FHL and its wholly-owned subsidiary and there was no default in regular repayment of them.

The investigation of Sebi does not allege or establish that the auditor was even aware of the fraudulent scheme.

"On the contrary, it is observed from the investigation of Sebi that the Notice had refused to sign unqualified unaudited financial information of FHL Group (which included FHsL) pending clarity on the recoverability of the ICDs, which were not repaid as contracted on September 30, 2017," it added.

FHsL here refers to Fortis Healthcare Ltd (FHL) and Fortis Hospitals Ltd.

The auditor's conduct do not indicate any mala fide and Sebi concluded that the charges leveled against the entity cannot be sustained and thus disposed of the adjudication proceedings.