The Reserve Bank of India (RBI) announced on Tuesday, October 12, that it has barred Haribhakti & Co. LLP, a chartered accounting company, from having a hand in any audit assignments in any entity monitored by the RBI for a span of two years, effective from April 1, 2022.
This is the first instance of disablement of a chartered accounting firm under section 45MAA of the Reserve Bank of India Act, 1934, which authorises the banking regulator to take action against auditors if they fail to comply with any direction given or order made by the RBI under the Act. The section was added to the RBI act in 2018 to take action against non-adhering auditors for their oversight and failure.
In a release, RBI stated that “in (the) exercise of the powers vested under section 45MAA of the Reserve Bank of India Act, 1934, (it) has, by an order dated September 23, 2021, debarred M/s Haribhakti & Co. LLP, Chartered Accountants (ICAI Firm Registration No. 103523W / W100048), from undertaking any type of audit assignment/s in any of the entities regulated by RBI for a period of two years with effect from April 1, 2022.”
The action of the RBI debarring the chartered accounting firm has been accounted to the failure of the audit firm to comply with a specific direction issued by RBI “with respect to its statutory audit of a Systemically Important Non-Banking Financial Company,” the statement read ahead without disclosing the name of the NBFC in question.
According to sources, the NBFC hinted in RBI’s statement is SREI Infrastructure Finance (SIFL), a listed firm, of which Haribhakti & Co. LLP was the auditor for the period of 2019-2020. The RBI had replaced the boards of SIFL and Srei Equipment Finance (SEFL) earlier this month over regulatory concerns and payment defaults.
RBI has also affirmed that the move will have no impact on the audit assignments undertaken by Haribhakti & Co. LLP in RBI monitored entities for the financial year 2021-22.