PwC quits as RCap, RHFL auditor over their unsatisfactory response in audit

PwC quits as RCap, RHFL auditor over their unsatisfactory response in audit

Reliance Capital (RCap) and its subsidiary Reliance Home Finance (RHFL) informed the stock exchanges on Wednesday that their auditor Price Waterhouse

Budget 2019: Sitharaman bets big on infra, commits Rs 100 trn over 5 years
How regulators, agencies are hurting India’s war on $190 bn bad loans
Indiabulls Housing, Escorts among 57 stocks that hit 52-week lows on BSE

Capital (RCap) and its subsidiary Home Finance (RHFL) informed the stock exchanges on Wednesday that their auditor (PwC) had resigned citing lack of “satisfactory” response from them during its audit of the 2018-19 financial results.

PwC had noted certain observations and transactions as part of the ongoing audit. The audit firm was of the view that these — if not resolved satisfactorily — might be significant or material to the financial statements, according to the exchange disclosures by the two firms.

The disagreement between the auditor and the two group firms might also lead to a legal battle, according to the

disclosures.

PwC was concerned as and had conveyed to the auditing firm that they “might initiate appropriate legal proceedings against the firm”.

PwC cited this as one of the reasons that “prevented it from performing its duties as statutory auditors and exercising independent judgment in making a report … and impaired its independence”.

On its part, both and said, “The company had clearly stated that the same (legal proceedings) would be initiated only if so legally advised, that too if required to protect the interests of all stakeholders, and it is hard to see how PwC has taken exception to this approach.”

PwC quits as RCap, RHFL auditor over their unsatisfactory response in audit

The disclosures highlight how the two and the auditors had come to a standstill during audit of the financial results. PwC had stated that though it had sent two letters — one in April and the other in May — to both companies, seeking clarifications, the had not responded satisfactorily.

Meanwhile, and in their statement have strongly rebutted the reasons cited by PwC. “The company has duly responded to the various queries and letters of PwC and has also duly and validly convened a meeting of the audit committee on June 12, 2019, to further respond to (the auditor’s) letter dated May 14, 2019,” the two informed the exchanges. It added that the companies expected PwC to participate in the meeting of the audit committee and not resign on the eve of the meeting. The companies have also “duly furnished all requisite and satisfactory details as required by PwC, especially including certification and confirmations of the transactions in question on multiple occasions by PwC themselves”, they added.

Experts say the recent development shows how auditors don’t want to take any chances, due to the increased scrutiny on their role.

“The liabilities for auditors are going up. They are aware that they can even be suspended if they are found not doing due diligence.

The Kotak committee has also said that the Securities and Exchange Board of India should have clear powers to act against erring auditors,” said Amit Tandon, founder and managing director of proxy advisory firm Institutional Investor Advisory Services.

Experts also feel such disclosures by companies will improve transparency. “Regulatory agencies and investors never had knowledge of these proceedings. For shareholders, transparency is always welcome and they should now read auditor reports more carefully,” said J N Gupta, founder and managing director of Stakeholders Empowerment Services.

The move led to a sharp fall in share prices of both companies. RCap closed 6.9 per cent lower at Rs 87.5, while RHFL was down 3.9 per cent at Rs 17.

The disagreement between the auditor and the two group companies may also lead to a legal battle, according to the disclosures.

PwC was concerned as RCap and RHFL had conveyed to the auditing firm that they “might initiate appropriate legal proceedings against the firm”. The auditing firm cited this as one of the reasons that “prevented it from performing its duties as statutory auditors and exercising independent judgment in making a report … and impaired its independence”.

On its part, both RCap and RHFL said, “The company had clearly stated that the same (legal proceedings) would be initiated only if so legally advised, that too if required to protect the interests of all stakeholders, and it is hard to see how PwC has taken exception to this approach.”

The disclosures highlight how the two companies and the auditors had come to a standstill during audit of the financial results. According to disclosures, PwC had stated that though it had sent two letters — one in April and the other in May — to both companies seeking clarifications, the companies had not responded satisfactorily.

Meanwhile, RCap and RHFL in their statement have strongly rebutted the reasons cited by PwC. “The company has duly responded to the various queries and letters of PwC and has also duly and validly convened a meeting of the audit committee on June 12, 2019 to further respond to (auditor’s) letter dated May 14, 2019,” the two companies informed the exchanges. It added that the companies expected PwC to participate in the meeting of the audit committee and not resign on eve of the meeting. The companies have also “duly furnished all requisite and satisfactory details as required by PwC, especially including certification and confirmations of the transactions in question on multiple occasions,” they added.

Experts say the recent development shows how auditors don’t want to take any chances, due to the increased scrutiny on their role. “The liabilities for auditors are going up. They are aware that they can even be suspended if they are found not doing due diligence. The Kotak Committee has also said that the Securities and Exchange Board of India should also have clear powers to act against erring auditors,” said Amit Tandon, founder and managing director, of proxy advisory firm Institutional Investor Advisory Services.

Experts also feel such disclosures by companies will improve transparency. “Regulatory agencies and investors never had knowledge of these proceedings. For shareholders, transparency is always welcome and they should now read auditor reports more carefully,” said JN Gupta, founder and managing director for Stakeholders Empowerment Services.

The move led to a sharp fall in share prices of both companies. RCap closed 6.9 per cent lower at Rs 87.5, while RHFL was down 3.9 per cent at Rs 17.

First Published: Thu, June 13 2019. 02:07 IST

Source

COMMENTS

WORDPRESS: 0
DISQUS: 0