NFRA debars CA Rajiv Bengali for five years, penalised

NEW DELHI: The National Financial Reporting Authority (NFRA) has debarred Rajiv Bengali, a chartered accountant associated with Subramaniam Bengali & Associates for professional misconduct, the Union Ministry of Finance said on Monday.

The NFRA has issued an order under section 132(4) of the Companies Act 2013 (the Act) in respect of professional misconduct by CA Rajiv Bengali of M/s Subramaniam Bengali & Associates, Engagement Partner for Statutory Audit of Trilogic Digital Media Limited (TDML) for the Financial Year 2016-17, NFRA said in a statement.

The NFRA has debarred him for five years from being appointed as a statutory auditor and internal auditor of any company or body corporate besides imposing a penalty of Rs 5 lakh, it said.

Some of the main lapses observed during the investigation of professional misconduct are: Auditor had falsely reported the audit of Cash Flow Statement despite the fact that TDML's Financial Statements did not include the Cash Flow Statement.

Auditor had also attempted to mislead NFRA with a fabricated Cash Flow Statement. Auditor was grossly negligent in issuing an unmodified audit opinion on Financial Statements which did not reflect a true and fair view of the state of affairs of the Company.

TDML had recognised Other Miscellaneous Expenditure of Rs 24.06 crore and had written off Rs 14.87 crore of Sundry Balances, which constituted 54.50 per cent of total expenses of Rs 71.43 crore. Such expenses were 3041 per cent higher than the previous year's similar expenses of Rs 1.28 crore.

Auditor had failed to exercise due diligence and maintain professional skepticism towards the possibility of material misstatements due to fraud despite existence of such abnormal/unusual transactions, NFRA said.

Auditor was negligent in evaluating the appropriateness of management's assumption of 'Going Concern' despite existence of adverse indicators like Revenue from operations decreased from Rs 51 crore to Rs 17.06 crore, TDML incurred loss of Rs 54.37 crore resulting in erosion of Net worth from Rs 58.89 crore to Rs 4.52 crore and reduction in Inventory from Rs 12.71 crore to Nil etc.

TDML recognised Deferred Tax Assets (DTA) of Rs 11.96 crore without any certainty of sufficient future taxable income, against which such DTA can be realised.

Auditor failed to report inappropriate recognition of DTA. Auditor had violated a large number of standards on auditing, accordingly, the audit of a listed company was performed in a perfunctory and casual manner.

Auditor had failed to ensure compliance with six accounting standards. TDML did not give disclosure regarding details of transactions in Specified Bank Notes, a requirement mandated subsequent to Demonetization in November 2016.

Similarly, TDML did not give complete disclosure regarding Related Party details and transactions. Auditor was grossly negligent in ensuring compliance with important disclosure requirements as per the Act.

Auditor had falsely reported that TDML, a media and content syndication company, is registered as a Non-Banking Finance Company under section 45 IA of the RBI Act 1934, NFRA said.`