PwC resigns as an auditor of Eveready Industries citing inter-group transaction
PwC had raised questions around Rs 62 crore in advances given to a lease hold company.
EIIL on Saturday told the capital markets that Singhi & Co, Mumbai based audit firm, has replaced PwC as the auditor.
According to the people in the know PwC had sought details of certain deposits and questioned EIIL about how the company wishes to recover these. These transactions would now be scrutinised by the incoming auditor and will have to question EIIL about the same. This, unless the company makes the required adjustments in their books before the financial results are declared, said two people close to the development.
EIIL’s stock price was down by 3.61% or Rs 3 to close at Rs 80 on Saturday.
“PwC has expressed its inability to continue as the auditors of the company,” EIIL told the browsers on Saturday.
PwC had raised questions around Rs 62 crore in advances given to a lease hold company. “Neither the deed has been executed nor the refund claimed,” PwC clarified in the audit report. EIIL posted an EBITDA loss of Rs 11.3 crore as per the latest filings.
The resignation comes weeks after PwC resigned as auditor of Reliance Capital and Reliance Home Finance. PwC had not gone into the specifics but merely hinted that there were certain transactions involving the group companies. “We did not receive substantive/satisfactory response to our queries in light of our observation. Accordingly we sent letter dated 24 April 2019 under the provisions of section 143 (12) of Companies Act read with Rule 13 (2) (a)..”
This comes around the time when the regulators have been going after auditors. From the Reserve Bank of India (RBI) to the Ministry of Corporate Affairs (MCA) have been probing role of auditors in some cases.
Insiders point out that many large audit firms are relooking at all their audit assignments and want to steer clear of any potential risk.
“In all the cases where auditors are either penalised or being investigated, none of the promoters, companies or banks are being held accountable. This is a huge risk for the auditors and there is a feeling that they are being made a scapegoat,” said a senior person close to the development.
Following a series of strict regulatory actions for alleged auditing lapses, the Big Four firms have kickstarted a debate over whether to walk away from potentially risky work and limit their client roster to multinational companies, prominent Indian companies and reputable start-ups. In the coming months, ET reported on June 14 that at least a dozen audits firms are evaluating whether they should resign. These include both those amongst the big four as well as smaller firms who may choose to walk away from “risky audits.”
Industry insiders point out that in the coming months more resignations in companies dealing in real estate, infrastructure and NBFCs could see problems related to auditors. In some cases few large auditors have already refused to sign the balance sheets before the quarter results or are threatening to disclose and question certain transactions in the signed audit report.