The board of Infrastructure Leasing and Financial Services (IL&FS) has issued show-cause notices to Deloitte and KPMG’s audit partner BSR and Co, after allegations of malpractice.
According to the Economic Times, the show-causes ask Deloitte to prove why it should not be removed as auditors after reportedly failing to highlight irregularities in IL&FS’s accounts that ultimately led to it defaulting on loan repayments.
BSR and Co had also jointly audited the firm’s accounts for the fiscal year 2018, before the first default by IL&FS in July that year. IL&FS ratings were downgraded as a result. Deloitte has already been dropped as the company’s auditors after more than 10 years.
The IL&FS board has also written to the Ministry of Corporate Affairs asking for punitive action against the two auditors. In its report to the Ministry, the board is said to have accused the two firms of failing to issue warnings about shortcomings while auditing the books.
It is reported the IL&FS board expects Deloitte to respond to its show-cause notice by May 24. Additionally the Ministry has conducted a probe into the audit with a hearing scheduled to take place on May 29.